A contract is also liable in equity to be set aside if 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.
Contract law permits a party from exising themself from their bargain if the contract is infected with an error on the part of one or both parties, as to a fundamental or significant element of the contract.
The allegation of mistake is essentially one of non est factum.
When both parties are mistaken on a basic and fundamental element of the contract: the contract is void from the start if the mistake is of such significance that it is a false yet fundamental assumption of the contract. In Solle, Lord Denning wrote:
"A contract is also liable in equity to be set aside if 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."
Unfortunately, the common law flounders on the shores of Lake Uncertainty in regards to any enduring doctrine of mistake, hi-lighting the need for statute in this area. In theory, each jurisdiction has developed its own meandering doctrine of what limits they place to allow the voiding of a contract because of a fundamental mistake. Worse, the lack of a cohesive body of law leaves not only litigants but commerce in general in the dark as to the direction of the court were they to seek relief based on mistake.
Some authorities, such as Anson's Law of Contracts, suggest that relief requires a measure of dishonesty on the part of one of the parties to the contract:
"Mistake as to the nature of the transaction entered into ... must arise from some deceit which ordinary diligence could not penetrate, or some mischance which ordinary diligence could not avert...."
Or in First City Capital:
"... the equitable jurisdiction of the Courts to relieve against mistake in contract comprehends situations where one party, who know or ought to know of another's mistake in a fundamental term, remains silent and snaps at the offer, seeking to take advantage of the other's mistake. In such cases, it would be unconscionable to enforce the bargain and equity will set aside the contract."
And then there is the concept of common mistake, as expounded by Justice Warrington in Bell:
"The learned judge thus describes the mistake involved in this case as sufficient to justify a Court in saying that there was no true consent - namely, some mistake or misapprehension as to some facts .... which by the common intention of the parties, whether expressed or more generally implied, constitutes the underlying assumption without which the parties would not have made the contract they did. That a mistake of this nature common to both parties is, if proved, sufficient to render a contract void is, I think, established law."
Where the common law is not grounded, scoundrels are sure to find abode. In Upton, the United States Supreme Court, Justice Hunt, wrote:
"It will not do for a man to enter into a contract, and, when called upon to respond to its obligations, to say that he did not read it when he signed it, or did not know what it contained. If this were permitted, contracts would not be worth the paper on which they are written. But such is not the law. A contractor must stand by the words of his contract; and, if he will not read what he signs, he alone is responsible for his omission."
This reiterates words which smack of the era they were written in, 1542, an ancient English case (Waverley):
"... although the truth be, that the plaintiff is paid his money, still it is better to suffer a mischief to one man than an inconvenience to many, which would subvert a law: for if matter in writing may be so easily defeated, and avoided by such surmise and naked breath, a matter in writing would be of no greater authority than a matter of fact...."
In Canada, Justice Cartwright wrote, in Prudential Trust, in dissent but later adopted by the Supreme Court in Marvco:
"... a person who executes a document without taking the trouble to read it is liable on it and cannot plead that he mistook its contents, at all events, as against a person who acting in good faith in the ordinary course of business has changed his position in reliance on such document."
Some jurisdictions have begun to codify aspects of the law of mistake. For example, §10 of the 2009 Sale of Goods Act of British Columbia:
"A contract for the sale of specific goods is void if, without the knowledge of the seller, the goods have perished at the time when the contract is made."
REFERENCES:
- Bell v Lever Brothers 1932 AC 161 at pages 224-227
- Duhaime, Lloyd, Contract Law
- Duhaime, Lloyd, Contract Law Dictionary
- Duhaime, Lloyd, Mistake, Rectification & Misrepresentation
- First City Capital v BCBC 43 DLR 29 (1989, BCSC)
- Fridman, G., The Law of Contract in Canada, 4th Ed., (Toronto: Carswell, 1999).
- Marvco Colour Research Ltd. v. Harris (1982) 2 SCR 774
- Prudential Trust Co. Ltd et al. v. Cugnet 1956 SCR 914
- R. v. Ontario Flue-cured Tobacco Growers', 1965 OR 411 and also at 51 DLR 2d 7 (ONCA)
- Sale of Goods Act, Revised Statutes of British Columbia 1996, Chapter 410
- Seppanen v. Seppanen 59 BCLR 26
- Solle v Butcher (1950) 1 KB 671; also at (1949) 2 All ER 1107
- Upton v Tribilcock 91 US 45 (1875)
- Waberley v Cockerel 1 Dy. 51.a (1542)