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Common Mistake

Frustration and Common Mistake


Mistake in Equity and Common Law Mistake
Last updated: 06-Oct-2014

Solle v Butcher [1950] 1 KB 671, per Denning LJ:

…it is necessary to remember that mistake is of two kinds: first, mistake which renders the contract void, that is, a nullity from the beginning, which is the kind of mistake which was dealt with by the courts of common law; and, secondly, mistake which renders the contract not void, but voidable, that is, liable to be set aside on such terms as the court thinks fit, which is the kind of mistake which was dealt with by the courts of equity.

Great Peace Shipping Ltd v. Tsavliris Salvage (International) Ltd [2002] EWCA Civ 1407, [2002]  2 All ER (Comm) 999, per Lord Phillips of Worth Matravers MR at p.1030 and 1037:

118. … the House of Lords in Bell v Lever Brothers considered that the intervention of equity, as demonstrated in Cooper v Phibbs, took place in circumstances where the common law would have ruled the contract void for mistake. We do not find it conceivable that the House of Lords overlooked an equitable right in Lever Brothers to rescind the agreement, notwithstanding that the agreement was not void for mistake at common law. The jurisprudence established no such right. Lord Atkin’s test for common mistake that avoided a contract, while narrow, broadly reflected the circumstances where equity had intervened to excuse performance of a contract assumed to be binding in law. …

153. A number of cases, albeit a small number, in the course of the last 50 years have purported to follow Solle v Butcher, yet none of them defines the test of mistake that gives rise to the equitable jurisdiction to rescind in a manner that distinguishes this from the test of a mistake that renders a contract void in law, as identified in Bell v Lever Brothers. … It is possible to reconcile Solle v. Butcher and Magee v. Pennine Insurance with Bell v. Lever Brothers only by postulating that there are two categories of mistake, one that renders a contract void at law and one that renders it voidable in equity. Although later cases have proceeded on this basis, it is not possible to identify that proposition in the judgment of any of the three Lords Justices, Denning, Bucknill or Fenton Atkinson, who participated in the majority decisions in the former two cases. Nor, over 50 years, has it proved possible to define satisfactorily two different qualities of mistake, one operating in law and one in equity.

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