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Void and Voidable Contracts

Guarantor’s Obligations
Last updated: 06-Oct-2014

Shogun Finance Ltd v Hudson [2004] 1 AC 919, per  Lord Phillips of Worth Matravers at p.976:

[169] Lord Nicholls of Birkenhead and Lord Millett propose an elegant solution to this illogicality. Where two individuals deal with each other, by whatever medium, and agree terms of a contract, then a contract will be concluded between them, notwithstanding that one has deceived the other into thinking that he has the identity of a third party. In such a situation the contract will be voidable but not void. While they accept that this approach cannot be reconciled with Cundy v Lindsay 3 App Cas 459, they conclude that Cundy v Lindsay  was wrongly decided and should no longer be followed.

[170] While I was strongly attracted to this solution, I have found myself unable to adopt it. Cundy v Lindsay exemplifies the application by English law of the same approach to identifying the parties as is applied to identifying the terms of the contract. In essence this focuses on deducing the intention of the parties from their words and conduct. Where there is some form of personal contact between individuals who are conducting negotiations, this approach gives rise to problems. In such a situation I would favour the application of a strong presumption that each intends to contract with the other, with whom he is dealing. Where, however, the dealings are exclusively conducted in writing, there is no scope or need for such a presumption.

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