Mistake

• Pages: 129-141

CHAPTER 8

MISTAKE

NATURE OF MISTAKE

In general, a party to a contract is bound, notwithstanding that he ‘made a mistake’

in entering into it. For instance, in an example suggested by Lord Atkin,

1 P agrees to

purchase from V, a roadside gas station. Unknown to P, a bypass road is about to be

constructed which will divert traffi c away from the area. P cannot escape from the

contract on the ground that he ‘made a mistake’, in the sense that he would not have

entered into it had he known about the proposed bypass road. Similarly, if B agrees

to buy goods from S for a certain price, believing that he will be able to resell them

at a profi t, but a sudden fall in the market value makes it inevitable that he will resell

at a loss, he remains bound by his contract with S. The principle in agreements for

sale is ‘caveat emptor’ (let the buyer beware).

However, there are a number of types of mistake of limited scope which may render

a contract void or voidable. These may be classifi ed under the following headings.

(a) Common mistake , i.e. where both parties made the same fundamental mistake

when entering into the contract.

(b) Mutual mistake , i.e. where the parties misunderstood each other and were, in

effect, ‘at cross purposes’ when entering into the contract, so that there was no

genuine offer and acceptance.

(c) Unilateral mistake , i.e. where only one of the parties was mistaken as to some

material fact when entering into the contract, and the other knew or must be

taken to have known of the mistake.

A mistake which renders a contract void or voidable is called ‘operative mistake’,

and the extent and effects of operative mistake in equity differ in some respects from

those at common law. As Denning LJ explained:

2

Mistake is of two kinds: fi rst, 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 fi t, which is the kind of

mistake which was dealt with by the courts of equity.

Mistake is considered to be a complex and somewhat unsettled area in the law of

contract. It is an aspect of contract law which does not often appear in the modern

cases, and there is a particular dearth of case law in Commonwealth Caribbean

jurisdictions.

3

1 Bell v Lever Bros [1932] AC 161, at 224.

2 Solle v Butcher [1949] 2 All ER 1107, at 1118.

3 In a recent Jamaican case, Clacken v Causwell (2010) Supreme Court, Jamaica, No 1834 of 2008,

unreported [Carilaw JM 2010 SC 101], Sykes J commented that ‘there are not many reported cases

in which a party has been relieved from performing his contract on the ground of mistake. The

reason is not hard to see. The courts lean in favour of performance. The effect of the doctrine of

mistake is that the contract is nullifi ed from the beginning.’