Mistake

CONTENTS
Contents ..................................................................................................................................... 1
1 Introduction ....................................................................................................................... 1
2 Mutual Mistake .................................................................................................................. 2
2.1 Objective theory of contract ....................................................................................... 2
2.2 Cases ............................................................................................................................ 3
3 Unilateral Mistake .............................................................................................................. 4
3.1 Mistake as to Identity of the Contracting Party .......................................................... 5
3.1.1 Written communications (inter absentes) ........................................................... 6
3.1.2 Face-to-face transactions (inter praesentes) ....................................................... 8
3.2 Mistake as to Terms of the Contract......................................................................... 11
4 Common Mistake ............................................................................................................. 15
4.1 Mistake in Common Law ........................................................................................... 15
4.1.1 Mistake as to Existence of Subject-Matter ........................................................ 16
4.1.2 Mistake as to Quality ......................................................................................... 18
5 Mistake in Equity ............................................................................................................. 21
5.1 Solle and Great Peace Shipping? Does Common Law trump Equity?....................... 21
5.2 Unilateral Mistake ..................................................................................................... 25

1 INTRODUCTION
Differences between the doctrines:

Frustration Mistake Misrepresentation

Supervening event occurs Common misapprehension Induced mistake, false
AFTER contract formation AT DATE OF ENTRY INTO statement induces Pf to
CONTRACT i.e. events enter the contract
before contract come into
existence

No inducement
E.g. Krell v Henry Mistake if procession was Misrepresentation if K was
(coronation viewing case) cancelled BEFORE contract AWARE that procession was
cancelled before contract
 Frustration because formation, and both parties formation, but told H
procession cancelled after were unaware otherwise so he would
contract formation enter contract

Types of mistakes:

Mistakes negativing consent Mistakes nullifying consent

(Mutual, unilateral mistake) (Common mistake)
Parties do not reach agreement, no Existing agreement between parties
consensus ad idem (formation, invalidated
communication mistakes)
Contract void ab initio Contract void/voidable
Other rules of law will be applied e.g. Independent external doctrine
certainty of terms, offer and acceptance
Broader Narrower

2 MUTUAL MISTAKE

2.1 OBJECTIVE THEORY OF CONTRACT

 The court applies objective criteria - each party can hold the other to what the first party
reasonably thought the other was promising. Either party can use this reasonable test.
 Therefore, the fact that one party is mistaken “in his innermost mind” is insufficient of
itself to automatically void a contract.
 This considerably reduces the scope of the doctrine of mistake.
2.2 CASES
One party misunderstands terms:

Tamplin v James (1879) 15 Ch D 215 (CA)

Facts Buyer misunderstood property advertised to include garden. Seller did not
contribute to buyer’s misunderstanding.
Holding Misunderstanding did not void contract, seller entitled to specific
performance (buyer had to buy property).

Court adopted an objective approach to contract:

 Buyer’s mistake made “without any reasonable excuse”
 Buyer will escape on the ground of mistake not contributed to by the
seller only if buyer will suffer “hardship amounting to injustice” by holding
him to his bargain and it is “unreasonable to hold him to it”.
Remarks MCW: Courts generally deny relief where a mistake was entirely the product
of the mistaken party’s own carelessness

OR both parties are mistaken, no consensus ad idem:

Raffles v Wichelhaus (1864) 2 H & C 906

Facts  Dfs agreed to buy from the Pfs a cargo of cotton to arrive “ex Peerless
from Bombay”. There were, unknown to the parties, two ships called
“Peerless” and both sailed from Bombay. The Dfs meant the Peerless
which sailed in October, whereas the Pfs meant the Peerless which sailed
in December.
 When the cotton eventually arrived, the Dfs refused to accept delivery
because they argued that the Pfs were obliged to deliver the cotton on the
Peerless which sailed in October, not the Peerless which sailed in
December.
 Pfs therefore sued for the price of cotton.
 Was the fact that the parties appeared to be at cross-purposes capable of
giving the Dfs a defence against Pfs’ claim?
Holding  Judgment for Dfs. Terms of offer and acceptance suffered from such latent
ambiguity that it was impossible to reasonably impute any agreement
between the parties.
 No reasons given, so difficult to extract ratio. But generally understood by
contract lawyers to stand for the proposition that latent ambiguity in the
terms of an offer and acceptance can operate to negative consent in an
appropriate case – no consensus ad idem; parties at cross-purposes

Therefore:

Wellmix Organics (International) Pte Ltd v Lau Yu Man [2006] 2 SLR 117 (SGHC)
Holding Andrew Phang J:
“The doctrine of mutual mistake overlaps completely … with the doctrine of
offer and acceptance, dealing with the issue of the formation of a pre-existing
transaction as opposed to a mistaken payment simpliciter”.
 “Put simply, this particular aspect of the law relating to mistake is simply the
result of a lack of coincidence between offer and acceptance. In other words,
both parties are at cross-purposes and hence, no agreement or contract has
been formed as a result.”

Also affirmed objective approach

3 UNILATERAL MISTAKE
 One party is mistaken and the other knows it; the latter is taken to know or is
responsible for the mistake

In cases involving mistake of identity, they seem to deal with the distinction between “I
dealt with X, not with you”, as opposed to “I would not have dealt with you”, the
emphasis in the former being on an intention to deal with a particular person to the
exclusion of others. Quare: How would the seller’s concern with the buyer’s
creditworthiness be treated under this approach?

Because he knows, etc, B cannot for that reason rely on the objective (external)
appearance of A's acts. But for this reasoning to apply, the mistake must be a serious
one: it must be a case where A is saying "I did not agree" rather than "I would not have
agreed had I known".

Almost all the cases concern mistake of identity: "I did not deal with you" as opposed to "I
would not have dealt with you if I had known." How does one establish which applies?
One can distinguish between identity and attributes, but is this satisfactory?

The strongest case is that where I can produce the person with whom I did intend to
deal, especially if that person is known to me.

For example:

 Typical scenario involves a rogue or thief who has no intention of paying for the goods
at the time of their acquisition from the original seller and sells them off to an innocent
third party, who pays for the goods in all good faith.
 Normally claim against rogue unlikely because he cannot be found or is simply not worth
suing (no money). Hence, original seller likely to bring claim against the innocent third
party.
 Cause of action lies in tort (conversion), but contract law is relevant because of the
general principle in law nemo dat quod non habet (you cannot give what you don’t have)
– requires an examination of the rights acquired by the rogue under the initial
transaction with the original seller
Cf misrepresentation:
 In these causes the rogue would have induced the seller to enter into a contract by a
fraudulent misrepresentation as to his identity
 Fraudulent misrepresentation renders a contract voidable; i.e. contract remains valid
and can operate to transfer ownership in the goods until such time as the contract has
been set aside
o Disadvantageous to seller because rogue will most probably have transferred the
goods to innocent third party buyer before he has the opportunity to discover the
truth and set aside the transaction with the rogue
o Result is that third party will win because he will acquire ownership of goods from
the rogue
 On the other hand, if there was mistake, then the contract is void and set aside for all
purposes and generally produces no legal effects whatsoever
o Effect is that the rogue could not have obtained property in the goods from the
original seller and therefore has no property rights to pass on to the innocent third
party purchaser
o Seller will win and be entitled to recover goods (or their financial value) from third
party purchaser

3.1 MISTAKE AS TO IDENTITY OF THE CONTRACTING PARTY

 The burden of proving there is no contract is on the party attempting to set it aside
 Four elements to prove to discharge burden
i) Mistaken party must show that he intended to deal with some person other than
the person who apparently made the contract with him
ii) The non-mistaken party knew of his intention to deal with the ‘some other
person’
iii) At time of making contract, the mistaken party regarded identity of contracting
party as fundamental; and
iv) The mistaken party took reasonable steps to verify identity of that party
One party is mistaken and the other is taken to have known it:

Boulton v Jones (1857) 27 LJ Ex 117 (Void)

Facts  J (mistaken party) only intended to deal with the previous owner
Brocklehurst because he owed J money and could set-off payment.
 However, B took over Brocklehurst’s business and filled J’s order without
disclosing the change of ownership.
 B wanted J to pay for order.
Holding Held void for mistake
 J need not pay since Bolton could not accept an offer which he must have
known was not addressed to him.
 Likewise, there is no valid contract if the offeror knows that the offeree
has accepted an offer reasonably believing it to have come from someone
else.
 MCW: Objectivity – you cannot accept someone else’s offer
3.1.1 Written communications (inter absentes)
 Where the parties deal with each other in a face-to-face transaction, the law presumes
that each party to the transaction intends to deal with the party in front of him. Thus
the fact that one party to the contract claims that he is mistaken as to the true name
(and hence identity) of the party who was in front of him will not suffice to render the
contract void.
 On the other hand, the names of the parties to the contract assume greater significance
in a contract that has been reduced to writing.
Not every mistake made by a party to a written contract renders the contract voidable:

King’s Norton Metal Co Ltd v Edridge, Merrett & Co Ltd (1897) 14 TLR 98 (CA)
Facts K sent goods in response to order from fictitious ‘Hallam & Co’ written on
headed stationery with a picture of a large factory and a list of overseas
depots. Fraudster subsequently sold goods to E.
Holding  No mistake for contracting with non-existent company, contract not void
for it.
 Although contract was written, CA held contract was only voidable for
fraud. K intended to contract with the writer of the letter (whoever he
was), being mistaken only as to his attributes, namely solvency and
respectability.
 CA held that if ‘Hallam & Co’ existed, then case might have come within
decision in Cundy v Lindsay.

But the general rule is: Contract is void if offeree accepts offer reasonably believing that he
is accepting an offer from an existing, identifiable party other than the actual offeror, and
the offeror knows this.

Cundy v Lindsay (1878) 3 App Cas 459 (HL) (Void)

Facts  Dishonest person Blenkarn used the name of a respectable firm (which Pfs
knew of) to order handkerchiefs from Pfs.
 Pfs duly delivered the handkerchiefs and Blenkarn sold them to Dfs. He
did not pay for the goods.
 Pfs sought to recover goods from Dfs upon realizing mistake.
Holding  Contract between Pfs and Blenkarn was voided for mistake. Pfs allowed to
recover goods from Dfs. Innocent third party purchaser (Df) liable for
damages for conversion.
 HL found that Pfs did not intend to deal with Blenkarn, but the reputable
firm, which was a firm they knew.
 In deciding that the contract was void the HL had regard to the fact that
the order form sent to the Pfs was signed with the name of the firm, and
the fact that the Pfs knew of a firm of that name and intended to deal
with that firm.

Supported in:
Shogun Finance v Hudson [2003] UKHL 62
Facts Pf (S) agreed to sell a car on hire purchase to R, a fraudster posing as Mr Patel,
after checking the credit rating of Mr Patel. R then sold the car to Df (H).
Holding HL held that Pf could recover the car from Df, the innocent purchaser, because
there was no valid contract with R.
 R was not named in the agreement, and the named buyer’s identity in the
agreement was of crucial importance to Pf.
 A court may be more likely to conclude that a written contract is void for
mistake, rather than where the contract is concluded face-to-face. But it is
not always straightforward to determine whether the contract has been
made face-to-face or in writing.
o Pf and R had never dealt face-to-face. R dealt with a car dealer who
forwarded to the Pfs the information that the Pfs needed in order
to decide whether or not to enter into the contract with the rogue.
o Df (third party) submitted that the R and Pf had dealt face-to-face
with the result that the presumption that a party intends to
contract with the person in front of him was applicable. Basis for
this was that car dealer had acted as Pf’s agent when
communicating information to the Pf.
o HL rejected this submission. R had never had any face-to-face
dealings with the Pfs. He dealt with them in writing by submitting
to them a written document for their acceptance or rejection. Nor
could it be said that the car dealer had acted as an agent of the Pfs
for the purpose of entering into any contract on behalf of the Pfs.
Rather, he was a “mere facilitator serving primarily his own
interests”.
o In line with commercial practice since credit-checking today is more
or less electronic.
 Hence, written contract. One of the terms of the contract described Mr
Patel as the customer, and parole evidence rule prevented Df from
including evidence to contradict the written term and establish that R was
the party to the contract rather than Mr Patel.
 Since hirer under the contract was Mr Patel and, as he had not in any way
authorized the conclusion of the contract, it was void. Pf recovers from Df
instead of “Mr Patel”.
o If it were face-to-face, contract would be voidable.

Tensions: Fairness to the innocent 3P purchaser v certainty in commercial

transactions.
 Who should bear the consequences of the fraudster’s actions? Should
innocent 3P purchaser suffer loss for which he has no control?
 Minority view: “As between two innocent persons the loss is more
appropriately borne by the person who takes the risks inherent in parting
with his goods without receiving payment … And this course makes
practical sense. In a case such as the present the owner of goods has no
interest in the identity of the buyer. He is interested only in
creditworthiness. It is little short of absurd that a subsequent purchaser's
 rights depend on the precise manner in which the crook seeks to persuade
the owner of his creditworthiness and permit him to take the goods away
with him. This ought not to be so. The purchaser's rights should not
depend upon the precise form the crook's misrepresentation takes.” i.e.
Arguing against voiding written contracts, but not face-to-face transactions
because of the different consequences on the innocent 3P.

 Distinction between King’s Norton and Cundy (and Shogun) is that the mistake in Cundy
was a mistake as to identity because the Pfs intended to deal with an identifiable third
party (Blenkiron & Co, a company which they knew), whereas in King’s Norton the Pfs
had not heard of Hallam and Co and simply intended to contract with the writers of the
letters (whoever was using the name ‘Hallam and Co’)
 It was necessary to resort to extrinsic evidence for the purpose of identifying the
existence of ‘Hallam and Co’ but, “once Wallis (the fraudster) was identified as the user
of that name, the party with whom the [Pfs] had contracted was established” and they
could not “demonstrate that their acceptance of the offer was intended for anyone
other than Wallis” (Shogun)
 It is therefore permissible to have regard to extrinsic evidence for the purpose of
ascertaining the identity of the person named in the contract but not for the purpose of
demonstrating that the party to the contract was not the party named in the contract
but some third party i.e. contradicting the named party. In the latter case the function
of the extrinsic evidence is to contradict the written terms of the contract (which the
courts will not permit – parole evidence rule) whereas in the former case resort is had to
extrinsic evidence for the purpose of identifying, and giving effect to, the intention of
the parties (which is permissible).
 Therefore, A’s mistake as to B’s identity will only void their contract if A mistook B for
another existing and identifiable party C (Cundy and Shogun). If A merely believes that
B is C who is non-existent or unidentifiable the contract is only voidable for fraud
(King’s Norton).

3.1.2 Face-to-face transactions (inter praesentes)

Earliest case, contract voidable:

Philips v Brooks [1919] 2 KB 243 (Not void)

Facts  Fraudster selected some jewellery in P’s shop and wrote a cheque for
£3000 saying ‘I am Sir George Bullough’, a person of good credit known to
P by reputation.
 P accepted the cheque after checking the address the fraudster gave in a
directory.
 Fraudster then pledged the jewellery to B for £350.
Holding  Held, P’s mistake did not prevent property from passing to B.
 P intended to sell to the person present in the shop even though P
believed that person was Sir George Bullough, an identifiable and existing
third party.
Contract void:

Ingram v Little [1961] 1 QB 31 (Void)

Facts  Pfs were two elderly sisters who were visited by a rogue who called
himself Hutchinson and who wished to buy their car. He produced a
cheque to pay for it, but one of the Pfs said that they would not accept a
cheque.
 The rogue then said that he was a certain PGM Hutchinson of Stanstead
House, Caterham. Neither of the Pfs had heard of this person, but one of
them went to the Post Office, checked in the telephone directory and
confirmed that there was such a person.
 Believing the rogue to be PGM Hutchinson they allowed him to take the
car on handing over the cheque which later proved to be worthless.
 The rogue then sold the car to the Dfs. When the Pfs discovered their
mistake they sought recovery of the car from the Dfs.
Holding CA held that the contract between the Pfs and the rogue was void for mistake
of identity.

Prima facie presumption that party intends to contract with person in front of
him in face-to-face transactions displaced by precise facts of the case.
 The decisive factor appears to be that the Pfs refused to accept the
rogue’s offer to enter into a contract on terms that he paid by cheque
until they had checked his identity in the telephone directory
 This showed that his identity was crucial to the creation of a contract and
not simply to the method of payment under a contract which had already
been concluded.
 Their checking of the directory rebutted the presumption that Pfs
intended to deal with person in front of them. They only intended to deal
with Hutchinson.
 Offer was directed to PGM Hutchinson and not the fraudster, so the
fraudster could not have accepted it
 Commercial setting, non-commercial setting made a difference?
 Exceptional because of the facts
Remarks But Phillips – directory also checked!

Decided based on other motivating factors e.g. old ladies, would be

inequitable to prevent them from recovering car; had taken so much effort to
find out about PGM Hutchinson?

Latest CA case distinguished mistake of identity and of attributes e.g. creditworthiness:

Lewis v Avery [1972] 1 QB 198 (CA) (Not void)

Facts  Rogue claimed he was a well-known actor, Richard Greene. He offered to
buy Pf’s car and signed a check.
 
But Pf did not want him to take the car until the cheque was cleared. To
persuade him, rogue produced an admission pass to Pinewood Studios
bearing the name Richard A. Green, his address, his photograph and an
official stamp. The Pf then let the rogue take the car in return for a cheque,
which proved to be worthless.
 The rogue then sold the car to the Df, from whom the Pf sought recovery
when he discovered his mistake.
Holding CA gave judgment for the Df. Pf could not recover from Df because prima facie
presumption that Pf intended to deal with the party in front of him (rogue)
was not rebutted. CA confined Ingram to its “special facts”.
 Property validly passed to Df via fraudster, since Pf intended to contract
with the person before him
 The offeror must have regarded the identity of the offeree as a matter of
vital importance for contract to be void. In present case, mistake is as to
attribute of the fraudster – mistake as to creditworthiness. i.e. It was not
his identity as Richard Greene that was crucial, but that he was
creditworthy. Thus, contract only voidable.
 But Lord Denning rejected identity-attribute distinction. Distinction
between mistake as to identity and mistake as to attributes is “a
distinction without a difference” and “do no good to the law”

Reconciliation in:

Shogun Finance v Hudson [2003] UKHL 62

Holding  Affirmed decision of Philips v Brooks and Lewis v Averay.
 Presumption that a contracting party intends to deal with the party who is
present in front of him is a strong one. It will not suffice to rebut the
presumption for a party to prove that he believed that the person in front
of him was, in fact, somebody else.
o Lord Walker in Shogun suggested that an example of certain situations
where the presumption is rebutted is that in which a rogue
impersonates an individual with whom the Pf is acquainted (e.g. Jacob
deceiving Isaac by impersonating Esau). But such cases are rare.
 In Shogun, both Lord Millett and Lord Walker were of the view that Ingram
had been wrongly decided. Lord Nicholls and Lord Phillips discussed the
case in critical terms but, while they clearly preferred the reasoning of
Devlin LJ, the dissenting judge in Ingram, they did not state in express
terms that Ingram had been decided incorrectly
 Therefore, since Shogun is a HL case, Ingram is now under a cloud of
doubt. A court will be slow to infer that the presumption will be rebutted

Provided that the offer is made to him, then whether his acceptance of the
offer is obtained by deception or mistake, and whether his mistake is as to the
identity of the offeror or some material attribute of his, the transaction should
result in a contract, albeit one which is voidable

Dicta regarding situations in which presumption applies

  Minority (Lord Nicholls, Lord Millett): Face-to-face presumption
(presumption that the seller always intends to contract with the person he
is dealing with) should apply in all cases including written communications.
Law should be consistent, so Philips and Lewis rule chosen to be applied
across the board (rather than Cundy).
o Because ultimately unilateral mistake issues are between the seller
and innocent 3Ps. They are both victims of fraud and having chosen to
sell, the seller should be taken to have assumed the risk since he could
have controlled it (conducting checks, insurance). The innocent 3P is
not always innocent, but he is in a more sympathetic position than the
seller.
o Distinction is artificial, eventually they would overlap completely? E.g.
Transactions between avatars? Would they be face-to-face or written?
 Majority (Lord Walker): The rule can apply to telephone communication,
but to extend it to post or email would be going far beyond identification
by sight and hearing. Therefore, written communication rule should apply
for emails.

Overall:
1. If person doesn’t exist, the contract is not void. A cannot say he is contracting with a
non-existent 3P.
2. In written contracts, only named persons in the agreement are parties to the
contract.
3. In face-to-face transactions, there is a prima facie presumption that party intends to
deal with the person present.
4. Ingram is an outlier.
Note context of the above cases: They almost all concern people who have been defrauded
of property and try to say that the property is still theirs because the transaction, a
purported contract, was a nullity. Maybe this particular problem should be dealt with in
other ways.

3.2 MISTAKE AS TO TERMS OF THE CONTRACT

Only mistake to terms voids the contract:

Smith v Hughes (1871) LR 6 QB 597

Facts Buyer purchased from a seller a quantity of oats in the belief that they were
old oats when, in fact, they were new oats and therefore unsuitable for the
buyer’s proposed use. When he discovered his mistake the buyer refused to
accept the oats and the seller sued for the price.

O&A.
Holding Jury found in favour of the buyer but the Court of Queen’s Bench ordered a
new trial because of a misdirection given to the jury by the trial judge.
 The Court of Queen’s bench held that a distinction must be drawn between
two different types of cases:
 Mistake as to fact does not void the contract
o The buyer correctly understands that the seller’s offer is an offer to
sell oats but mistakenly believes these oats to be old oats, and this
mistake is known to the seller
o In such a case the seller is not under an obligation to inform the buyer
that he has made a mistake (see further Statoil ASA below)
o Responsibility lies with the buyer to ensure that the oats are as he
believed them to be; he cannot escape from what is a bad bargain for
him by arguing that it was the responsibility of the seller to inform him
of his error
 Mistake as to terms renders contract voidable
o The seller knows that the buyer is mistaken as to the terms of the
seller’s offer. The seller believed that the buyer thought he was buying
oats which the seller had promised were old
o In such a case there is an offer and acceptance mistake and the seller
is under an obligation to inform the buyer of the true nature of his
offer, failing to do so will mean that the buyer is not liable to take the
oats

Therefore
 Unless Smith (Pf) had contracted or warranted that the oats were old oats,
in which case it would be a term, Hughes (Df) has no case and cannot
refuse to pay.
o Contract only void for mistake when it is regarding terms
o Even if one party makes a unilateral mistake known to the other in
entering the contract, the contract remains valid if parties’ intentions
objectively show agreement (mistake as to fact but not terms)
 Caveat emptor (“buyer beware”) applies where buyer has full opportunity
of inspecting goods and chooses to act on his own judgement. Where
seller acts to deceive buyer, this will not apply.

Statoil ASA v Louis Dreyfus Energy Services LP [2008] EWHC 2257 (Comm)
Facts  Statoil made a mistake when inputting info into software to calculate
demurrage due from LD (sum due calculated based on mistaken date)
 LD aware of mistake but did not inform Statoil.
 Statoil only realized the mistake after settlement agreement reached.
 Statoil pleaded unilateral mistake at common law.
Holding Held, unilateral mistake as to fact not terms (Smith v Hughes applied).
Contract is binding.
 Mistaken date was not a term of the settlement agreement – Df in no way
caused Pf to arrive at the wrong date, which was a result of Pf’s own
carelessness
  However, subsequent oral agreement to pay a greater sum superseded
settlement agreement. But point here is that settlement agreement would
nevertheless have been binding regardless of mistake

General rule
 If one party has made a mistake as to the terms of the contract and that
mistake is known to the other party, then the contract is not binding. The
reasoning is that although the parties appear, objectively, to have agreed
terms, it is clear that they are not in agreement. Therefore the normal rule
of looking only at the objective agreement of the parties is displaced and
the court admits evidence to show what each side subjectively intended to
agree by way of terms.
 If one party has made a mistake about a fact on which he bases his
decision to enter into the contract, but that fact does not form a term of
the contract itself, then, even if the other party knows that the first is
mistaken as to this fact, the contract will be binding: Smith v Hughes.

Snapping up cases:

Hartog v Colin & Shields [1939] 3 All ER 566

Facts Dfs entered into a contract to sell 3000 Argentinian hare skins to the Pfs.
However by mistake they offered them for sale at 10d per pound instead of
10d per piece. When they discovered their mistake, the Dfs refused to deliver
the skins.

O&A.
Holding No contract. Mistake to terms.
 By trade custom and negotiations (which had always discussed ‘per piece’
not ‘per pound’), the buyer must have realized, and did in fact know, that a
mistake had occurred in the offer.
 Further evinced by great price disparity.
 Therefore Pf cannot snap up and offer when he is aware that Df has made
a mistake relating to terms of the offer.
 Price is clearly a term

Chwee Kin Keong v Digilandmall.com Pte Ltd [2004] 2 SLR 594 (SGHC)
Facts  Dfs mistakenly altered the price of commercial laser printers on their
website. The price was altered from close to $4k to $66. Overnight some
4000 printers were ordered before the Dfs were informed of their
mistake.
 Dfs contacted all the purchasers immediately once they became aware of
the mistake, informed them of the mistake and stated that they would
not be supplying the printers at the price of $66.
 Pfs who ordered 1606 printers refused to accept this and claimed that
they were entitled to the benefit of their bargain.
Holding Mistake as to fundamental term of contract, i.e. price. Thus, contract void.
 “The essence of “snapping up” lies in taking advantage of a known or
perceived error in circumstances which ineluctably suggest knowledge of
the error.
 A typical but not essential defining characteristic of conduct of this nature
is the haste or urgency with which the non-mistaken party seeks to
conclude a contract; the haste is induced by a latent anxiety that the
mistaken party may learn of the error and as a result correct the error or
change its mind about entering into the contract.”
 Pfs “were fully conscious that an unfortunate and egregious mistake had
indeed been made by the Dfs”
 In reaching such a conclusion, VK Rajah JC had regard to the fact that
there was a “stark gaping difference between the price posting and the
market price” of the printers and the fact that the Pfs were “well-
educated professionals – articulate, entrepreneurial and quite bluntly,
streetwise and savvy individuals”
 A further factor relied on was the circumstances in which the printers
were purchased. The orders were placed in the “dead of night” with
“indecent haste” and the email exchanges between the Pfs demonstrated
that they were “clearly anxious to place their orders before the Dfs took
steps to correct the error”.
Remarks Nature of knowledge required
 HC: “A steady stream of decisions from common law courts indicate a
measured but nevertheless distinctly incremental willingness to extend
the scope of the exception to not just actual knowledge, but deemed or
constructive knowledge as well.”
 CA: Actual knowledge or Nelsonian knowledge (i.e. wilful blindness:
shutting one’s eyes to the obvious) required for contract to be void in so
far as unilateral mistake at common law is concerned
 Where wilful blindness is concerned, when should a party make inquiries
failing which he would be considered to be shutting his eyes to the
obvious? There must be a “real reason to suppose the existence of a
mistake”. This may not be a very exact test, but “[a]t the end of the day,
the court must approach it sensibly. The court must be satisfied that the
non-mistaken party is, in fact, privy to a “real reason” that warrants the
making of an inquiry.”
 Why only actual knowledge? Because only in such a case is there no
consensus ad idem. The concept of constructive knowledge is an
equitable concept. In the absence of actual knowledge on the part of the
non-mistaken party, a contract should not be declared void under the
common law as there would then be no reason to displace the objective
principle.
 HC in Wellmix Organics (International) Pte Ltd v Lau Yu Man
acknowledged CA’s findings but made the observation that the line
between actual knowledge and constructive knowledge can be blurred,
especially in cases concerning wilful blindness, which may well actually be
a high (or even the highest) degree of constructive knowledge
4 COMMON MISTAKE
 Contract entered into is based on a fundamentally mistaken assumption
 Hardly ever voids contract because contracts are made to be upheld
 Does not apply when contract expressly or impliedly provides for risk allocation i.e. who
bears the risk of the relevant mistake
Interpretation – implied terms, total failure of consideration, res extincta – so many other
things we can void contract for but then the fact that no cases have been successfully
pleaded under mistake shows judicial attitude.
Language of the test for common mistake is very similar to test of frustration. Difference is
that you are mistaken as to subject-matter or state of affairs, something thought to have
existed BEFORE the contract were concluded. Only events after the contract was formed fall
under frustration – supervening.
More reluctant because more serious consequence? Not just brought to an end
(terminated) but treated as though it was never formed (void ab initio). Notions of sanctity
of contract and security are challenged a lot more when a contract is void and not just
ended.

4.1 MISTAKE IN COMMON LAW

General test is that common mistake must be fundamental for party to set aside contract
(Bell v Lever Bros):

 Lord Blanesburgh: The mistake must relate to “something which both [parties] must
necessarily have accepted in their minds as an essential element of the subject matter”
 Open-ended and depends on the particular facts of the case
Requirements for contract to be void (Great Peace Shipping v Tsavliris at 76):
1. A common assumption as to the existence of a state of affairs (Common mistake)
2. No warranty by either party that that state of affairs exists (No allocation of risk)
3. Non-existence of the state of affairs not attributable to the fault of either party (No
fault)
4. Non-existence of the state of affairs must render performance of the contract
impossible
5. The state of affairs may be the existence, or a vital attribute of the consideration to be
provided or circumstances which must subsist if performance of the contractual
adventure is to be possible
Local position on common mistake (Phang & Goh, pp 210-213):

 General principles
o Courts uphold contracts rather than destroy them (Sanctity of contract)
o The doctrine applies only to unexpected and wholly exceptional circumstances
(Strict requirements)
 Two preconditions before one considers how to apply the doctrine (No allocation of
risk/fault)
o There must have been no allocation of risk to either party, of the consequences
occasioned by the mistake
o The mistake is not attributable to the fault of either party
 Requirements for contract to be void for mistake
o The mistake, relating to facts or law, must be shared by both parties before the
contract was concluded (Common mistake)
o The mistake must render the subject matter fundamentally different from that
which the parties contracted on as constituting the basis of their
contract/performance must be impossible (GPS) (Sufficiently fundamental)
 Consider cases of mistakes as to existence of subject-matter and quality

4.1.1 Mistake as to Existence of Subject-Matter

Mistake as to the existence of the subject-matter of the contract/possibility of performing
contract would void the contract:

Couturier v Hastie (1856) 5 HLC 673 (Void)

Facts  Parties entered into a contract for the sale of a cargo of corn, which was
believed to be in transit from Salonica to the UK.
 But, before the contract was made and unknown to both parties, the corn
had deteriorated to such an extent that the master of the ship sold it.
 The seller argued that the buyer remained liable for the price of the corn
because he had bought an “interest in the adventure” or such rights as the
seller had under the shipping documents.
Holding HL held that contract was void. Cargo of corn no longer existed at the time
contract was concluded (res extincta).
 Subject-matter of the contract was not the rights of the seller under the
shipping documents but the existing cargo of corn itself (a matter of
construction)
 Since the corn did not exist, there was a total failure of consideration
(non-performance) and the buyer was not liable to pay the price.
 Note that there was no reference to doctrine of mistake (decided before
Bell v Lever Bros), decided based on total failure of consideration

Cf, unilateral promise regarding existence of subject-matter:

McRae v Commonwealth Disposals Commission (1951) 84 CLR 377 (HCA) (Not void)
Facts Dfs purported to sell to the Pfs the wreck of a tanker which was lying on the
Jourmand Reef and was said to contain oil. The Pfs embarked upon an
expedition in an attempt to salvage the vessel but no tanker was found and,
indeed, no such tanker had ever existed.
Holding Contract not void. Pfs succeeded in action for breach of contract.
 Dfs had argued that there could be no liability for breach of contract
because the alleged contract was void owing to the non-existence of the
subject-matter of the contract. This argument was rejected by the court
 on the ground that the Dfs had promised that such a tanker was in
existence and they were liable for breach of that promise
 Couturier distinguished on the ground that there the parties had entered
into the contract under the shared assumption that the corn was still in
existence and could be sold by the seller; that assumption proved to be
unfounded and the contract was held to be void.
 But here, the Dfs had actually promised that the tanker was in existence.
They had assumed the risk of the non-existence of the tanker and for the
breach of their promise they were held liable in damages.
Remarks Even if we can distinguish McRae from Couturier, how do we reconcile it with
SGA? Argue that facts like McRae are not caught by s 6 since the tanker never
existed and therefore could not have “perished”.

No allocation of risk for doctrine of mistake to apply:

Assoc Japanese Bank v Credit du Nord [1988] 3 All ER 902 (QB) (Void)
Facts  Rogue approached Pf bank to raise money by sale of machinery. Pf bank
purchased 4 machines from rogue and leased them back to him. Pf bank
wanted this to be guaranteed.
 Rogue’s obligations under this sale and leaseback contract were
guaranteed by Df bank.
 Both banks believed that the machines existed and were in the rogue’s
possession.
 When rogue failed to keep up payments under the lease (rogue
absconded), it was discovered that the machines did not exist and the
transaction was a fraud by the rogue
 Pf bank sought to enforce guarantee on Df bank.
Holding  Actual decision had nothing to do with mistake
o On true construction of guarantee, guarantee contained an express
or implied undertaking in favour of the Df bank that machine was in
existence. Since machinery did not exist, guarantor not liable.
 Court went on to consider alternative argument based on mistake and
also came to the conclusion that Pf’s claim failed on this further and
separate ground. i.e. Contract void for mistake.
o Court held that test of common mistake was satisfied and guarantee
was void – guarantee of a lease with non-existent machines
fundamentally different from guarantee of lease of existing machines
o Non-existence of subject-matter of principal contract (lease) is of
fundamental importance.
o Subject-matter of contract between Pf and Df was not the machinery,
but the lease, since Pf bank insisted on the guarantee. The machinery
was the subject-matter of the lease.
o But judge saw lease as part of overall scheme, hence justified focus
on machinery which did not exist, rather than the lease which did.
Remarks But note that this case also not decided on mistake. Would have been void if
mistake were argued but this is strictly dicta.
Couturier thought to have led to Sale of Goods Act s 6:

Where there is a contract for the sale of specific goods, and the goods without the
knowledge of the seller have perished at the time when the contract is made, the
contract is void.

Note: s 61 defines “specific goods” as “goods identified and agreed on at the time a
contract of sale is made and includes an undivided share, specified as a fraction or
percentage, of goods identified and agreed on as aforesaid”.
 A contract is automatically void if there is a mistake as to existence of subject-matter,
regardless of fundamentality of the mistake?
 Narrower than common law doctrine
o Applies to goods which once existed but which have subsequently perished;
does not apply to goods which never existed;
o Not subject to the contrary intention of the parties and would seem to apply
irrespective of parties’ risk allocation
 Criticism: Should at least give effect to the parties’ contrary intentions and not just
automatically apply?
Therefore:

 If subject-matter/goods once existed but subsequently perished: SGA s 6 automatically

voids contract (narrow application)
 If goods never existed:
o Depends on construction of the contract, Couturier cf McRae
o Only if contract is silent on risk allocation is there scope for invoking, Assoc Japanese
Bank v Credit Du Nord

4.1.2 Mistake as to Quality

Mistake as to quality appears to have stricter requirements than mistake as to existence of
subject-matter for contract to be void for mistake (Lord Atkin):

Bell v Lever Bros [1932] AC 161 (HL) (Not void)

Facts  The Dfs, Bell and Snelling, entered into a contract with the Pfs under which
they agreed to serve for five years as chairman and vice-chairman
respectively of a subsidiary company of the Pfs. One of the terms of their
service agreements was that they must not make any private profit for
themselves, by doing business on their own account, while working for the
subsidiary.
 But Dfs moonlighted and did not disclose profits to Pfs. The Pfs later
decided that they wished to terminate the Dfs’ contracts because of a
reorganization of their business. So they entered into compensation
agreements with the Dfs under which they agreed to pay Bell £30k and
Snelling £20k in exchange for their consent to the termination of their
service agreements.
  After money had been paid, the Pfs discovered the breaches by the Dfs of
their service agreements. The significance of the breaches by the Dfs was
that they would have entitled the Pfs to terminate the service agreements
without the payment of any compensation. In these circumstances the Pfs
sought to recover the money which they had paid to the Dfs.
 A crucial feature of the case was the finding of the jury that, when they
entered into the compensation agreements, the Dfs did not have their
breaches of duty in mind (they had thought their contract could only be
terminated by payment of compensation).
 The parties therefore entered into the compensation agreements under a
common mistake that the service agreements were valid when they
were, in fact, voidable.
Holding Held 3:2 that Pfs could not recover the money because mistake was not
sufficiently fundamental for compensation contract to be void. No mistake as
to terms of service agreement.
 Test developed by the majority (Lords Atkin, Thankerton, Blanesburgh)
o Lord Atkin: Mistake as to existence of subject-matter of contract
and mistake as to identity of contracting parties can suffice to set
aside a contract. But mistake as to quality will not affect assent
“unless it is the mistake of both parties and is as to the existence of
some quality which makes the thing without the quality essentially
different from the thing as it was believed to be.”
 On facts of the case, not entirely clear why £50k not considered
fundamental. Possibly because HL did not want to lay down a principle
which would enable parties to escape from what was merely a bad
bargain. They wanted to hold men to their bargains and to emphasise the
exceptional nature of the jurisdiction of the court to set aside a contract on
the ground of mistake.
 Steyn J in Associated Japanese Bank v Credit du Nord interpreted the
mistake as not having been as significant as it appears at first sight because
the Pfs were very anxious to carry through their reorganization and to
secure the Dfs’ consent to the termination of their service agreements and
so they might have entered into the compensation contract, even if they
had known of the Dfs’ breaches of duty.
 Mac suggests alternative reasons
1. Principal claim was one of fraud; mistake claim was added as an
afterthought and given less complete consideration
2. Fraud claim failed on facts
3. Bell and Snelling were found to have made significant contributions to
the success of the company and so the profits which they had made
from their wrongdoing were trifling in comparison to the benefits
which the Pfs had obtained from their services. Therefore, not
sufficiently fundamental
 Since burden of proof was on Lever to prove that mistake was
fundamental, the existence of the doubt was fatal to their claims
Digilandmall [67]: In other words, the mistake must render the subject matter of the
contract essentially and radically different from the subject matter which the parties
believed to exist.
Affirmed:

Leaf v International Galleries [1950] 2 KB 86 (CA) (Not void)

Facts Both parties mistakenly believed that painting was by famous artist Constable
when it was in fact a copy. Seller said it was by Constable.
Holding  Action was based on misrepresentation only (not mistake). Case of
innocent misrepresentation, not strong authority.
 However, in obiter, CA made comment that that the contract would not
be set aside on the ground of mistake since both parties entered into the
contract erroneously believing the picture to be a Constable.
 Mistake is only as to quality of subject-matter (painted by Constable) and
not to subject matter itself (painting itself).

Rose v Pim [1953] 2 All ER 739 (CA) (Not void)

Facts Pf ordered horsebeans which were supposed to be feveroles (a more valuable
type of horsebean). Df supplied feves, a different type of horsebean. Contract
specified only the sale of horsebeans and not feveroles specifically.
Holding Contract not void for mistake. Erroneous assumption of quality of subject-
matter underlying the contract, not an erroneous mistake giving rise to
rectification i.e. Not sufficiently fundamental?

Great Peace Shipping Ltd v Tsavliris Salvage (International) Ltd [2002] EWCA Civ 1407;
[2003] QB 679
Facts  Df salvors agreed to provide salvage services for a vessel which was in
serious difficulties in the South Indian Ocean.
 Dfs were informed that the Great Peace was close to the vessel which was
in difficulty and so they contacted the Pfs (owners of the Great Peace) by
telephone and agreed to hire it for a minimum of five days.
 It subsequently transpired that the Great Peace as not as close to the
stricken vessel as the Dfs had believed (it being 410 miles away rather than
35 miles).
 When they discovered the true situation the Dfs sought to obtain the
services of another vessel which was not as far away and, once they had
done so, they purported to terminate the contract of hire with the Pfs.
 Pfs sued to recover the hire. Dfs resisted claim on the ground that the
contract to hire the Great Peace was vitiated by a common mistake as to
the true location of the vessel.
Holding CA held that the mistake was not sufficiently fundamental to set aside the
contract. Pfs entitled to recover 5 days hire.
 While the vessels were 410 miles apart and it would have taken them
some 22 hours to meet, this was not such a time delay as to render
 performance “essentially different from those which the parties had
envisaged when the contract was concluded”.
o Not so far away as to defeat parties’ common assumption that it could
still act as backup
o Furthermore, Dfs failed to cancel agreement on discovering actual
situation until they found and hired the nearer vessel. Reinforced
assumption of backup.
 Again, shows judicial attitude – reluctant to find contracts void for
common mistake. Likely to remain “few and far between”.
o Identified common elements in previous cases (Couturier, McRae,
Scott v Coulson, Assoc Japanese Bank v Credit du Nord) and laid down
requirements (see above).

Possible exception:

Scott v Coulson [1903] 2 Ch 249

Holding  Contract for the sale of a life assurance policy was held to be void when,
unknown to both parties, the assured had died and the value of the policy
had consequently increased from £460 to £777.
 Note subject-matter here was life assurance policy and not assured (the
person who died).
o If it were the assured, then contract may have been void for non-
existence of subject-matter
o But here, the quality is mistaken (it had changed due to the assured’s
death but neither party knew)
 May not be a very good case. CA in Great Peace Shipping held that it is “by
no means easy to reconcile with Bell v Lever Bros”
 But underlying principle is still fundamentality – has the mistake as to
quality made the contract so essentially different?

5 MISTAKE IN EQUITY

5.1 SOLLE AND GREAT PEACE SHIPPING? DOES COMMON LAW TRUMP EQUITY?
Steyn J in Assoc Japanese Bank v Credit Du Nord (pre-Great Peace Shipping) at 275: “Equity
will give relief against common mistake in cases where common law will not, and it provides
more flexible remedies, including the power to set aside the contract on terms.”

 Narrow doctrine of common law mistake (Bell) supplemented by a more flexible

doctrine of mistake in equity (Solle v Butcher)
 Where contract is void for common law mistake, there is no mistake in equity. If
contract is valid, equity is considered and prepared to do fairness and justice.
Mistake in equity can void contract even if it is valid in common law? i.e. Can overturn
common law decision:
Solle v Butcher [1950] 1 KB 671
Facts  Solle was Butcher’s tenant and managing agent. Rent which could be
charged for residential premises was controlled by legislation.
 Both parties believed the premises rented by Solle were not affected by
this legislation after taking legal advice. Rent was agreed at £250 pa.
 After Solle had been in residence for some time, he discovered that the
premises were in fact controlled premises under the legislation and that
the maximum permissible rent was £140.
 Solle brought an action to recover the overpaid rent (even though he had
agreed to £250). Had the parties known that the premises were
controlled, there was a legal way in which they could have raised the rent
to £250 under the legislation (for renovations Butcher had done to the
flat). But, of course, the parties had not done that.
 CA held that the lease was valid at common law and Solle could not
recover.
Holding  However, in equity, lease should be set aside on terms. Both parties
mistakenly believed it was free from rent control.
o Lord Denning at 693: Misapprehension was fundamental and party
setting it aside was not at fault
 But setting aside would cause considerable hardship to tenant, so Solle
was given the option to re-enter a new lease at the correct price (specific
performance).

Lord Denning:
 Two kinds of mistake
o “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”
o “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.”
 Contract not void for common mistake in common law (not sufficiently
fundamental)
o “Let me first consider mistakes which render a contract a nullity. All
previous decisions on the subject must now be read in the light of Bell
v Lever Bros. The correct interpretation of that case to my mind is
that once a contract has been made, that is to say, once the parties
whatever their inmost states of mind, have to all outward appearance
agreed with sufficient certainty in the same terms on the same
subject-matter, then the contract is good unless and until it is set
aside for breach of some condition expressed or implied in it, or for
fraud, or on some equitable ground. Neither party can rely on his
own mistake to say that it was a nullity from the beginning, no
matter that it was a mistake which to his mind was fundamental, and
no matter that the other party knew that he was under a mistake.”
o “Applying these principles, it is clear that here there was a contract.
The parties agreed in the same terms on the same subject matter.”
 While the mistake is fundamental to the landlord, “it is not a ground
for saying that the least was from the beginning a nullity”.
 Contract can be found voidable in equity
o “Let me next consider mistakes which render a contract voidable,
that is, liable to be set aside on some equitable ground. Whilst
presupposing that a contract was good at law … the court of equity
would often relieve a party from the consequences of his own
mistake, so long as it could do so without injustice to third parties.”
o A contract is liable to be set aside if
i. “The mistake of the one party has been induced by a material
misrepresentation of the other, even though it was not
fraudulent or fundamental” (Innocent misrepresentation)
ii. “One party, knowing that the other is mistaken about the
terms of an offer, or the identity of the person by whom it is
made, lets him remain under his delusion and concludes a
contract on the mistaken terms instead of pointing out the
mistake” (Unilateral mistake as to terms)
iii. “The parties were under a common misapprehension either as
to facts or as to their relative and respective rights, provided
that the misapprehension was fundamental and that the
party seeking to set it aside was not himself at fault”
 Note two requirements

Therefore, claim allowed in equity on the facts

 Solle was the one who told Butcher that Butcher could charge £250 pa in
the first place, now “quite unashamedly” wanted to get for £140.
 £250 pa was “not only the rent he agreed to pay but also the fair and
economic rent; and it is also the rent permitted by the Acts on
compliance with the necessary formalities” (i.e. the renovation bit).
 Rescission on terms that tenant be offered new lease of £250 pa
Remarks Equity v common law?
 Wider doctrine of “fundamental mistake” in equity (encompasses a
broader range of mistakes)
o Although Lord Denning stated that in equity the mistake must also be
“fundamental” and that the party seeking to set aside the contract
must not himself be “at fault”, he also asserted that the court had
power to set aside a contract which is valid at law “whenever it is of
the opinion that it is unconscientious for the other party to avail
himself of the legal advantage which he has obtained”.
 Standard of fundamentality of mistake lower in equity than in
common law?
 Mistake in equity renders a contract voidable, not void
o When a contract is set aside on ground of mistake in equity, innocent
3P rights can be protected
 Greater remedial flexibility in equity to set aside contract on terms
o Much easier to obtain remedy in equity than in common law
 o E.g. Can adjust rights and responsibilities of parties, attach conditions
to the entitlement of one party to set aside the initial contract
o Rectification (“rewriting” contracts), specific performance etc.
Remedies are discretionary and courts will decide based on
conscionability.

Also applied in Credit du Nord (at 27o), reaffirming the flexibility and liberal
attitude of equity

Disagreed with 50 years after Solle, argued that common law trumps equity but this is not
decisive (both CA):

Great Peace Shipping Ltd v Tsavliris (International) Ltd [2002] EWCA

Holding T pleaded, inter alia, that agreement is voidable in equity. CA held agreement
valid in common law.
 There is no jurisdiction in equity to grant rescission of a contract on the
ground of common mistake where the contract is valid and enforceable
at common law (at [157])

Solle v Butcher disapproved (at [160])

 CA cannot generally refuse to follow its own decisions, but concluded that
it was entitled to refuse to follow Solle v Butcher and the line of cases
which it generated on the ground that it was “impossible to distinguish
and reconcile Denning’s test in Solle v Butcher for fundamental mistake
with Bell v Lever Brothers” (at [154], [157]) and Bell is, of course, a HL
decision
o Effect of Solle was not “to supplement or mitigate the common law”
but that it was “to say that Bell v Lever Brothers was wrongly
decided”
 Therefore, “if coherence is to be restored to this area of our law, it can
only be by declaring that there is no jurisdiction to grant rescission of a
contract on the ground of common mistake where that contract is valid
and enforceable on ordinary principles of contract law”.
 “Inconceivable that the House of Lords [in Bell] overlooked an equitable
right in Bell to rescind the agreement, notwithstanding that the
agreement was not void for mistake at common law” (at [118]).
o If there was such a right in Bell, they would have exercised their
equitable right. Since HL didn’t do anything then contract is not void
in common law and there is no role for equity to play
o The HL in Bell intended to conclude that the agreement was valid
and binding and this was so whether the claim was brought at law or
in equity.

Lord Philips MR (at [161])

1) Denning LJ wrongly relied on Cooper v Phibbs as authority for a separate
doctrine of common mistake in equity
 2) Unclear how the Solle test of fundamental misapprehension is different
from common law common mistake test
3) Best left to legislature to improve the flexibility of the doctrine of mistake,
than the courts

But what about fairness, justice, flexibility?

Remarks Solle v Butcher no longer good law and to be regarded as having been
wrongly decided in terms of legal principle in the UK? Can only be
conclusively determined by UKSC (since Bell was HL).

i.e. GPS holds that there is no common mistake in equity – essentially nullified if it cannot
trump common law (if common law finds it void, then no need for equity; if common law
finds it valid, equity cannot find it voidable anyway). But technically open position since
both are CA cases. However, the test is the same – fundamental – and can argue there
should be no difference OR can argue that equity should remain since it is more flexible.
Blah blah
Locally:

Olivine Capital v Chia Chin Yan [2014] SGCA 19

Holding [63]: There are in fact two broad categories of common mistake – common
mistake at common law and common mistake in equity, respectively. As we
shall very briefly touch on below, the latter category no longer exists under
English law, but is still an existing category under Singapore law.

[69]: Indeed, it is now established in the local case law that there continues
to be a doctrine of common mistake in equity, the leading decision being that
of this court in Chwee Kin Keong and others v Digilandmall.com Pte Ltd [2005]
1 SLR(R) 502

Supported by Wellmix Organics dicta at [55]-[77]. It does not make sense to

endorse unilateral mistake in equity but not common mistake in equity.

Test relied on should be Solle v Butcher (fundamental; not party’s own fault)
which has doubted in UK but not in Singapore i.e. can still be good law. Solle
is heavily relied on in finding unilateral mistake in equity in Singapore, thus
can be assumed that their reasoning for equity is approved.

5.2 UNILATERAL MISTAKE

Lord Denning contemplated the use of equitable mistake in cases of unilateral mistake (“no
matter that the other party knew that he was under a mistake”). You have previously
observed how the High Court of Australia developed promissory estoppel further to permit
its use as a cause of action. In equitable mistake, the High Court of Australia has applied
mistake in equity to a scenario where one party was mistaken and the other knew of the
mistake:
 Taylor v Johnson (1983) 151 CLR 422 (HCA)
Facts Df contracted to sell land to Pf. Df mistakenly thought that the price was
$15,000 and thus fixed it as contract price, but subsequently realised his
mistake. Pf knew of the mistake and sought to prevent Df from knowing. Pf
sued for specific performance while Df sought rescission.
Holding Contract was set aside.
 HCA held that contract is void in equity if one party to the contract enters
into it under a serious mistake as to the content or existence of a
fundamental term and the other party has knowledge of that mistake, and
deliberately sets out to prevent the mistaken party from being aware of
his mistake/misapprehension; unconscionable.
 It is unfair that the mistaken party should be held to the written contract
by the other party whose lack of precise knowledge of the first party's
actual mistake proceeds from wilful ignorance because, knowing or
having reason to know that there is some mistake or misapprehension, he
engages deliberately in a course of conduct which is designed to inhibit
discovery of it.
 i.e. Cannot say that contract is not void because there is no common
mistake, because non-mistaken party deliberately averted his eyes from
the mistake
Remarks Cf Hartog v Colin & Shields

Locally, pre-Great Peace Shipping:

Chong Sze Pak v Har Meng Wo [1998] 1 SLR 472 (SGHC)

Facts  Pf and Df entered a contract for D to sell his property to Pf.
 Clause 11 of the contract stated that the price was $315/sq foot on the
basis that the area was 1633 sq ft (according to the property agent).
Therefore price was $515,000.
 However, it turned out that the area was only 1035 sq foot. Pf requested
purchase price to be amended to $326,025 but Df refused.
 Pf sought declaration for $326,025 and for Df to complete the sale.
 Df relied on the common law defence of mistake alleging that there was a
common mistake of fact or that Pf knew of the Df’s mistake and took
advantage of it.
Holding Relied on Lord Denning’s statement in Solle v Butcher (like the HCA did),
permitted contract to be rescinded in equity on ground of unilateral mistake.
 Instances where relief may be granted:
o If a party knows that the other is so mistaken and lets him remain
under his delusion and concludes a contract on the mistaken terms
instead of pointing out the mistake;
o Where the mistake of a party is induced by the other even if
innocently
o Where hardship amounting to injustice would be inflicted on the
mistaken party by holding him to his bargain and it is unreasonable to
hold him to it;
 o Where one party is aware that the other party is under some serious
mistake or misapprehension about the content or subject matter of a
fundamental term and deliberately sets out to ensure that he does
not become aware of the mistake or misapprehension.

Affirmed; rejected Great Peace Shipping in unilateral mistakes:

Chwee Kin Keong v Digilandmall.com Pte Ltd [2005] 1 SLR 502 (SGCA)
Holding At SGHC, V K Rajah JC inclined toward conflating unilateral mistake at
common law and equity at [130].

However, this point was reversed on appeal. Great Peace Shipping (equity
cannot void a contract where in common law it is valid) applicable only to
common mistake and NOT to unilateral mistake.

Rejected GPS at [74]:

 “A simple way to distinguish Great Peace Shipping from the present case
would be to say that it was a case on common mistake and, to that
extent, what was discussed therein could not be applicable to a case
involving unilateral mistake. However, we would go further than that.
 We would be loath to hold that there is no equitable jurisdiction in the
courts with regard to unilateral mistake just because it may be difficult to
delineate the scope or extent of that jurisdiction.
 By its very nature, the manner in which equity should be applied must
depend on the facts of each case and the dictates of justice. Equity has
intervened in many aspects of human dealings in the contractual setting.
For example, it has rescinded a contract induced by innocent
misrepresentation: see Redgrave v Hurd (1881) 20 Ch D 1. Often, a case
on innocent misrepresentation does raise issues of mistake. Equity has
also intervened where there is undue influence.
 As such, we see no logic in denying the existence of this jurisdiction in the
area of unilateral mistake ...”

Elaboration at [80]:
 “To the extent that the court below thought that there is no equitable
jurisdiction in the courts to deal with the situation where one party is
mistaken as to an important or fundamental term, we would
respectfully disagree. Where the case falls within the common law
doctrine of unilateral mistake, there is, in effect, no contract. There will
be no room for equity to intervene.
 But where it does not and the court finds that there is constructive
knowledge on the part of the non-mistaken party, the court would, in
the exercise of its equitable jurisdiction, be entitled to intervene and grant
relief when it is unconscionable for the non-mistaken party to insist
that the contract be performed.
  Accordingly, we accept the amicus curiae’s submission that constructive
knowledge alone should not suffice to invoke equity. There must be an
additional element of impropriety. The conduct of deliberately not bringing
the suspicion of a possible mistake to the attention of the mistaken party
could constitute such impropriety.”

Therefore, in unilateral mistake

 Actual knowledge or wilful blindness of non-mistaken party will render
contract void in common law.
 Constructive knowledge of the mistake + impropriety/sharp practice of
non-mistaken party will render it void in equity.
Remarks Contrast the English interpretation of Great Peace Shipping vis-à-vis unilateral
mistake in Statoil ASA v Louis Dreyfus Services:

Aikens J (at [105]): “The Great Peace decision strongly suggests that there is
no such jurisdiction in the case of a unilateral mistake. If there is no such
jurisdiction in the case of a common mistake, I fear I am unable to see how, in
logic, one can devise a rationale for an equitable jurisdiction in the case of a
unilateral mistake, at least where there has been no misrepresentation by
the other party….”

Therefore UK still accepts GPS. Since there is no equity in common mistake

then there is none in unilateral mistake, at least where there is no
misrepresentation by non-mistaken party. SG position is different.

Local position on unilateral mistake in equity, Digilandmall [80]:

 Where the contract is void in common law, there is no room for equity to intervene.
 Where the contract is valid in common law, but constructive knowledge of the non-
mistaken party is found, the court can intervene and grant relief when it is
unconscionable for the non-mistaken party to insist that the contract be performed.
 Constructive knowledge alone does not suffice; there must be an additional element of
impropriety e.g. deliberately not bringing the suspicion of a possible mistake to the
attention of the mistaken party
 Fear of floodgates is “more apparent than real” [81]

Some comments and concerns on SG’s position on unilateral mistake in equity (SGHC):

Wellmix Organics (International) Pte Ltd v Lau Yu Man [2006] 2 SLR 117
Holding  Application of equity in unilateral mistake as applicable to Singapore at
[63], per Digilandmall.
 However, preferable to have one doctrine in unilateral mistake having the
same test, differing only in consequences (at [71]):
o “Contracts which fall within the scope of the doctrine of common
mistake at common law are rendered void, whereas contracts which
 fall within the scope of the doctrine of common mistake in equity are
rendered voidable.
o Looked at in this light, it might well be appropriate to allow (as in the
situation of common mistake noted in the preceding paragraph) both
the formulations with regard to the common law and equitable
doctrines in the context of unilateral mistake to remain the same –
bearing in mind the fact that the courts would probably be more
favourably disposed towards applying the equitable doctrine as the
contract would be rendered only voidable, rather than void, and (in
that sense) would not adversely impact bona fide third party rights
(this point, interestingly, is in fact referred to in the Digilandmall case
itself at [46]).
o In other words, the difference would lie not in the formulations as
such but rather in the consequences and (if what I have said is
accepted) the actual application of the respective doctrines
themselves in the particular cases concerned. If so, then the
distinction between actual and constructive knowledge would lose
its importance.”
 The element of ‘impropriety’ utilises the concept of unconscionability
which is itself unsettled and may give rise to unintended side-effects if
applied to unilateral mistake in equity (at [72]):
o “I might also observe that the addition of the element of
“impropriety” in so far as the doctrine of unilateral mistake in equity
is concerned brings the entire doctrine itself close to – if not
coincident with – the equitable doctrine of unconscionability.
o While it could be argued that the element of “impropriety” utilises
the concept of unconscionability as a rationale rather than a
substantive doctrine in itself, the substance of the matter might, with
respect, suggest otherwise.
o The status of unconscionability as a substantive doctrine is still
unsettled in the context of the Commonwealth and there has, in my
view, been no definitive pronouncement by the Court of Appeal as
such. If it is felt that the local courts are not yet ready to embrace this
particular doctrine (of unconscionability), the addition of the element
of “impropriety” in the context of the doctrine of unilateral mistake in
equity might have some unintended side-effects in the manner just
stated.”
 But final position is still Digilandmall (prevailing authority). Can refer to
this for difficulties that may possibility arise if the distinction of actual and
constructive knowledge, or of impropriety, is used to decide if contract
should be void in common law or equity.