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LAW OF CONTRACT

CONTINUATION…

II. MUTUAL MISTAKE

A mutual mistake occurs when both the offeror and the offeree are at cross purposes about

the subject matter of the contract. In such cases the courts adopts the objective test by

examining the terms of the contract, the conduct of the parties, and the ensuing transactions

and based on this may determine and enforce the specific performance of the contract or

declare the contract void. See Riverlate Properties v Paul (1975) Ch 133. This objective test

helps to prevent from rescinding/withdrawing from performance of a contract on the grounds

of mistake. Thus the nature of the mistake must be fundamental to affect the substance or

quality of the subject matter of the contract. In Tramplin v James (1879) 15 Ch.D 215, the

court ordered the specific performance against the defendant who had bought a property on

an auction sale on the mistaken belief that the property had a garden which was his interest.

The court separated the defendant’s carelessness to investigate the building plans of the

property which was on display. See also S. Nasser & Sons Nig ltd v Lagos Executive

Development Board (1959) PSC 2424 SC. The decision of the court in Tramplin (supra)

differs from its in decision in Denny v Hancock (1870) LR 6 Ch. App. 1 because while the

building plans in Tramplin’s case was clear the building plan in the instant case was unclear

thus misleading the defendant to enter in to a contract with the plaintiff.

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III. UNILATERAL MISTAKE

In unilateral mistake only one party makes the mistake to the actual or presumed knowledge

of the other party. In such circumstances the court will apply both the subjective test to

determine the true intentions of the party under mistake and the objective test determine

whether the other party should have known of the mistake of the first party. Abdul Yusuf v

Nigerian Tobacco Company (unreported) suit no: CAS/39/74

This type of mistake can either be mistake as to the identity of or mistake as to the nature of a

document.

a. Mistake as to identity

The mistaken party must show that it had no intention to contract with the other party.

Therefore to establish mistaken identity, the mistaken party must prove the following:

i. That he intended to contract with some other person entirely, not someone with a

different attribute or character King’s Norton Metal co. Ltd v Edridge Merrett

&Co ltd (1897) 14. TL 998

ii. That this intention must have been known to the other party Boulton v Jones

(1857) 2 H&N 364

iii. That the identity (not the character) must have been of crucial importance to the

mistaken party Ingram v Little (1961) 1 QB 31

iv. That the mistaken party must have taken steps to verify the identity of the other

party.

N/B it is challenging to prove identity in oral transactions.

b. Documents mistakenly signed

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This type of mistake is governed by the legal principle non est factum (it is not his deed) and

it operates as a shield not a sword because, generally a person is bound by the terms of a

contract he signed whether or not he read or understood except it is shown otherwise. In this

case, the mistaken party was not negligent and he was fraudulently induced or the terms of

the contract misrepresented to sign a contract whose terms are different from what he read or

were explained to him. Foster v MaKinnon (1869) LR 4cp 7004. This defence was initially

created to be applied to contracts with blind and illiterate persons but by the case of

Thoroughgood (1584) 2 Co Rep 49

For a plea of non est factum to avail the mistaken party, he must prove the following;

i. That the document he signed must be of a different class, nature from what he

intended to sign

ii. That he was not negligent.

The defence do not avail a party whose mistake is hinged on the legal effects of a document

signed not mistake as to facts. OLayinka v Oke (2002) 48 WRN 179. N/B that the mistakes

under common law void the contract ab initio and this creates grave losses especially where

an innocent third party is involved. Therefore the courts will only grant equitable remedies in

the following circumstances:

a. Where the mistake is a common or mutual mistake of a material nature

b. Where the mistake is a unilateral mistake induced by fraud or misrepresentation or

knowledge of the other party

c. Where it is inequitable for the party seeking to uphold the contract to rely on his

strict rights at common law

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In this light the court may grant the equitable reliefs of recession, refusal of specific

performance or rectification.

MISREPRESENTATION

A misrepresentation is a false statement of fact made by one party to the other in the course

of negotiating a contract that induces that other party to enter into a contract.

Misrepresentation may be a misrepresentation of facts, an event, opinions or intentions but

not of law except where it is a willful misrepresentation of the law. Ordinarily, non-disclosure

or silence cannot consititue misrepresentation except in the following forms of contracts;

a. Contracts Uberrimae fidei(utmost good faith). Contracts in which only one party

possesses full knowledge of the material facts e.g contract of insurance. Here, the law

mandates full disclosure because only one party has full knowledge of the material

facts. A failure to disclose all material facts makes the contract voidable at the

instance of the other contracting party

b. Fiduciary relationships e.g solicitor/client, doctor/patient, parent/child. Here, one

party occupies a superior position above the other which causes that other party to

repose trust and confidence in him. This puts the first party in an advantageous

position with greater bargaining power. See Tate v Williamson (1886) LR 2 Ch App 55

c. Family settlements

d. Contracts where failure to disclose distorts a positive representation

N/B on the legal principle of the privity of contract a party a non contracting party cannot sue

for the misrepresentation of another and secondly, misrepresentation is a continuing act. That

is to say it has no time lapse. Smith v Kay (1859) 7 HLC 750.

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There are three types of misrepresentation:

a. Fraudulent misrepresentation

The court in Lord Herschell in Derry v Peck (1889)14 App. 337 defined fraudulent

misrepresentation as a ‘false statement made; a. knowingly b. without believe in its truth and

c. recklessly or carelessly whether it be true of false. i.e to say where there is a lack of honest

belief in that which is stated, that statement is fraudulent.’ In fraudulent misrepresentation the

defence of the due diligence of the affected party will not avail the fraudulent party. See Sule

v Aromire (1951) 20 NLR 20. Remedies under the common law include damages and rescission.

b. Innocent misrepresentation.

This deals with misrepresentation that is neither fraudulent nor negligent. Remedies at

common law include rescission while it is indemnity at equity.

c. Negligent misrepresentation

Negligent misrepresentation is restricted or confined to fiduciary contracts where one party

owns the duty of care to the other party. For emphasis Lord Denning in the case of Esso

Petroleum Company Ltd v Mardon (1976) QB 801

…if a man who has or profess to have special knowledge or skill, or makes a representation

by virtue thereof to another –be it advice, information or opinion- with the intention of

inducing him to enter in to a contract with hi, he is under a duty to use reasonable care to see

that the representation is correct and that the advice, information or opinion is reliable. If he

negligently gives unsound advice, or misleading information or erroneous opinion, and

thereby induces the other side into a contract with him, he is liable in damages.

Remedies
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For both fraudulent and negligent misrepresentation, the aggrieved party is entitled to

damages and rescission at common law while for innocent misrepresentation; the aggrieved

party is entitled to rescission and indemnity. Rescission will not avail a party iff he has;

a. Affirmed the contract

b. There is substantial lapse of time between the conclusion of the contract and the

institution of an action. Time begins to run when the aggrieved party discovers the

truth.

c. Where a third party has acquired rights in the subject matter of the contract for value

and without notice of the misrepresentation.

d. Only in innocent misrepresentation where the contract has been executed.

DURESS AND UNDUE INFULENCE

Duress at common law is a narrow provision while undue influence is provided for in equity

to take in wider situations where unnecessary pressures are applied. For comprehension,

duress may be defined as any unlawful threat or coercion used by a person to induce another

to act or to restrain from acing in a manner him or her otherwise could not or would not have

done both dimensions mean pressures to a party directly or indirectly. The court in the case of

Pao On v Lau YIu Long (1986) AC. 614 to be coercion of will to vitiate consent.

FORMS OF DURESS

1. Economic Duress

See North Ocean Shipping Company Ltd v Hyundei Construction Company Ltd (1979) QB

705
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2. Duress of Person

This relates to actual or threatened violence to a person calculated to produce fear of loss of

life or limb or bodily harm Kaufmann v Gerson (1904) 1KB 591

3. Duress of Goods

Is the actual or threatened detention of goods. Skeate v Beale (1840) 11 A&E 983. In law of

contract, duress makes the contract voidable.

UNDUE INFULENCE

The court defined undue influence in Earl of Anglesford v Morris (1873) Ch.App 484 at 490

as ‘the unconscientious use of one person of power possessed by him over another in order to

induce the other to enter into a contract.’ This type of condition is termed unequal bargaining

power. Undue influence is subtle while duress is direct threat. An exception to is the standard

form contract. See Schroeder Publishing Company Ltd v Macaulay (1974) 1 WLR 1308

Undue influence may be determined where there are no special relationship e4xisting

between both parties. In such a case, the aggrieved party has to prove actual coercion or the

exercise of a degree of control or dominance over him William v Bayley (1866) LR 1HL 200

where a father threatened about the safety of his son raised a mortgage to his disadvantage and Bua v

Dauds (2003) 43 WRN.

In cases where a special relationship exists between both parties equity will presume the existence

of undue influence see Tate v Williamson supra. In such cases, the defendant must prove the

following;

a. That the plaintiff acted independent of his influence

b. That the plaintiff acted in exercise of his freewill

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However, acquiescence, affirmation and lapse of time frustrates duress and undue influence Alkeard v

Skinner (1887) 36 Ch.D 145

ILLEAGALITY AND VOID CONTRACTS

Illegal contracts are distinct from void contracts in that illegal contracts are expressly prohibited at

common law or by the statute and which attracts a sanction or punishment. Dunalin Investments Ltd

v BGL plc & Anor (2016) 18NWLR (Pt 2544) 262 at 315 while void contracts are contracts void at

common law or statutes and it bears no sanctions nor give any right in law. Sagay classifiesfurther

classifies them into:

i. Contracts illegal by statues

ii. Contracts illegal at common law

iii. Contracts void at common law

i. Contracts illegal by statutes : this class of contracts can be determined in the following

ways;

a. Express prohibition of certain types of contracts for instance; contracts with Biafran

currencies e.t.c see the following cases; Nwasike v Onwuameze (unreported) Suit No:

LD/612/70, Madam Anna Chukwudifo v Oguta Shawe (unreported) LD/834/70, Sodipo v

Lemminkainen (1986) 1NWLR (pt 15) 220

b. The regulation of a particular trade, profession or dealing in a particular commodity resource

for professions. E.g The Land Use Act

Note that in a contract illegally formed a sanction is attached and both parties have no right, but in a

contract illegally performed, an innocent party has right arising there from and the party who

performs the contract illegally has no right.

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c. Protection of a class, or the public or the promotion of an object of public policy contracts

under Illiterates Protection Act. See the case of Malwani v Chandira Corp (1995) 6 NWLR

(Pt 402) 438 at 460

d. Revenue raising statutes

ii. Contracts illegal at common law(by public policy)

It is determined thus;

a. A contract to commit a crime, tort or fraud. See the case of Allen v Rescous (1676) 2 Lev.174

(a contract to beat a third party), Clay v Yates (1856) H&N 73 (contract to publish a libelous

material) and ACB V Alao (1994) 7 NWLR (Pt 358) 614

b. Contract prejudicial to the status of marriage Alake v Chief Oderinlo (unreported) Suit No:

23A174

c. Contracts prejudicial to public safety

It is illegal to enter into contracts with an enemy or a person from an enemy controlled territory or

state because it aids the economy of the enemy. Such contracts are frustrated by the war and therefore

unenforceable. Daps v Haco ltd (1970) 2 All NLR 47 but in cases of debts the war suspends such

agreements it does not discharge the debt. Daimler co ltd v Continental Tyre and Rubber Co (Great

Britain) (1916) 2AC 307 at 348

d. Contracts prejudicial to the administration of justice.

Willams v Bayley (1866) LR 1Hl 200. For bribery see R v Andrews (1973) QB 422, R v

Panayiotou (1973) 3 All ER 112. McGregor v McGregor (1888) 21GBD 424 (Collusion in

divorce)

e. Contracts that tend to promote corruption in public life

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Bribery to procure a public appointment contrary to public policy is void. See Section 98 and 116 of

the Criminal Code; Golden Okoronkwo v P.O Nwoaja (1972) 2ECSLR 615; Temple Koko v Page

Communications Eng. Inc and Edward G. French (unreported) Suit No: LD/936/73

f. Contracts to defraud the revenue

iii. Contracts void at common law

Such contracts include the following;

a. Contracts to oust the jurisdiction of the courts

Bello and Dairo v Alowonle (1968) (2) ALR 118 but where a contract contains a clause that a dispute

amongst parties must first be settled by an ARBITRATION AND DISPUTE RESOLUTION

mechanism before proceeding to the courts, then it is not void Campagnie Miniere et Metallurgique

v Owners of M.V Haron (unreported) HC Warri W/74/70

b. Contracts that are sexually immoral

c. Contracts in restraint of trade determined in four ways;

 Restraints imposed on employees by employers

 Restraints imposed on the vendor of a business by a purchaser of that business

 Restraints arising from combination for the regulation of trade relations

 Restraint as accepted by distributors of merchandise.

UNENFORCEABLE CONTRACTS

By the statute of General Application the Statue of Frauds 1677 became applicable to Nigeria. This

Statute listed six categories of contracts which cannot be enforced except it is written. These

categories of contracts have been constricted to involve just two in Nigeria;

1. Contracts of guarantees
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Which involves three parties; the debtor, the guarantor for the debt of the debtor and the creditor. This

type of contract differs from a contract of indemnity in that; a contract of guarantees affects three

parties while a contract of indemnity just two. A contract of guarantees does not take away the

liability of the debtor but it does in a contract of indemnity. See Bentworth Finance (Nig) Ltd v

Ibrahim (unreported) High Court of Lagos Suit No: LD/47a/69 therefore a contract of indemnity

can be enforced against a party 3even though it is not in writing because it is not covered by law.

Mountstephen v Lakeman (1874) LR 7HL 17a written contract of guarantees only becomes

unenforceable after the conclusion of the contract, the contract is altered or amended without the

knowledge or consent of the guarantor. Only written contracts are varied in writing.

2. Contracts for the sale or disposition of land

See Ekpanya vAkpan (1989)2 NWLR (pt 101) 86 at 97 and Ejuetami v Olaiya (2002) 9WRN 1

Here such contracts are unenforceable not void or voidable. An enforceable contract is a valid

contract suffering from a procedural defect. It cannot be enforced directly by bringing an action for

that purpose. The court will decree a specific performance at equity where the other party had partly

performed his part of the consideration under unenforceable contracts. This is to prvenbt the

benefitting party from jujsing the statute to perpetuate fraud. Udolisa v Nwanosike (1973) ECSLR

603 part performance flows from estoppels. Obijiaku v Offiah (1995) 7NWLR (PT 409) 510.

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