Mistake 2- Common Mistake

What are the two types of common mistake?

1. mistake as to the existence of the subject matter.

2. mistake as to the fundamental underlying assumption of the contract.

Describe mistake as to the existence of subject matter.

Where both parties believe the subject-matter exists at the time and both are mistaken, the contract will be void.

Regarding mistake of the existence of the subject matter, what was held in Couturier v Hastie [1852]?

a contract for the sale of corn that both parties believed was en route to the UK, but had already been destroyed was void.

Regarding mistake of the existence of the subject matter, what was held in Galloway v Galloway [1914]?

a separation agreement was deemed void when a couple discovered their marriage was a nulity.

Regarding risk allocation, what was held in McRae [1950]?

• the defendant contracted to sell salvage rights to an oil tanker which did not exist.

• the court held that the defendant impliedly guaranteed the existence of the ship recklessly and without reasonable ground.

Regarding risk allocation, what was held in Amalgamated Investments v Walker [1977]?

The defendant took on the risk of the warehouse becoming an architectural or historic building, as demonstrated by their enquiries prior to the sale.

Describe mistake as to the fundamental underlying assumption of the contract.

a mistake which may render the contract impossible to perform or essentially and radically different from what the parties originally agreed.

Regarding fundamental mistake, what was held in Bell v Lever Bros [1932]?

the court rejected the claim as the mistake was not sufficiently fundamental. The mistake must be to the existence of some quality which makes the thing without the quality essentially different from what it was believed to be.

Regarding fundamental mistake, what was held in Western Potato Co-Op v Durnan [1985]?

the parties entered into a contract for the sale of potato seeds which they mistakenly believed to be fertile. The mistake was one of quality, which went to the root of the contract and rendered it void.

Regarding fundamental mistake, what was held in Fitzsimmons v O’Hanlon [1999]?

the court followed Bell and emphasises that they should only enforce contracts in exceptional circumstances.

What approach did equity adopt in the English case of Solle v Butcher [1950]?

the courts of equity intervened and rendered the contract void.

What approach did equity adopt in the English case of
Great Peace Shipping v Tsavliris Salvage [2002]?

The court held the mistake was not sufficiently fundamental as the defendant received what he contracted for and the mistake was evidently not crucial enough if he did not immediately seek to cancel the contract.

What approach did equity adopt in the Irish case of
O’Niell v Ryan [1991] and Intrum Justitia BV [2005]?

the Bell and Solle approach, not Great Peace Shipping