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Contract Law


A contract can be defined as an agreement whose purpose is to yield a legal relationship that is binding or to bring about some legal effect (Jansen & Zimmermann, 2011, p.632). Basically, the role played by the doctrine of mistake has lately been analysed by England’s higher courts: For instance, the Court of Appeal narrowed the equity application by focusing on ‘common mistake’ while making a decision in the Great Peace Shipping v. Tsavliris International. In the Shogun Finance Limited v. Hudson, a solid assumption in the unilateral mistake cases was reaffirmed by the House of Lords that the contract should be with the individual the offeror was with in the face-to-face situations. These two cases according to Greenwood (2004, p.495) have led to the placing of restrictions on the role played by the doctrine of mistake. Essentially, this role was continually questioned some time ago with some arguing that in contract law there is no room for this form of doctrine because it overlaps with some areas of contract law that ensure fairness and maintain business certainty. This essay seeks to discuss Beatson et al. (2010, p.296) statement that theCourt of Appeal decision in the Great Peace was uncompromising and emphatic and that the doctrine of the common mistake in equity has no place in the law of contract. The paper will focus on equitable doctrine and common mistake doctrine with reference to Great Peace case.


A mistake according to Mann and Roberts (2016, p.16) is an erroneous belief held by one or more parties to a contract. A contract could be voided based on the nature of the mistake, but the mistake could be corrected by the court as a matter of order rectification or construction of the contract. However, the damages for the mistake cannot be offered to the mistaken party because this is not a wrongdoing claim. A mistake of fact can be divided into three; the unilateral mistake, mutual mistake and common mistake. This essay will mainly focus on the common mistake, which happens when both parties to a contract make a similar mistake as evidenced in the Bell v. Lever Bros. When this type of mistake happens, there is a high probability that the court will consider the contract to be void; therefore, cancel it. Still, the court have to be contended that the mistake was necessarily central to the contract so as to consider it void as demonstrated in Great Peace case. This case offers a clear example of a contract made based on a ‘common mistake’ that is deemed to be binding. Lord Phillips while making his judgment argued that terms of the contracts were agreed by both parties (Nwafor, 2015, p.215). The lack of equitable power that existed under the Solle v. Butcher before it was overruled is in some measure pacified by the notion that when one party to a contract asks the court to declare the contract void due to a mistake, the court will first determine whether one party has actually agreed to be responsible (bear the risk) in case the common belief is actually erroneous (Harvey, 2014).

In the Great Peace case, the judges differed with the Solle v. Butcher reasoning arguing that it was difficult to reconcile the decision with the Bell v Lever Bros ruling. However, Olatawura (2014, p.54) posits that it was needless for the Great Peace court to take issue with Lord Denning judgement in the Solle v. Butcher. Besides that, it was inappropriate for the court to decisively hold that the House of Lords in the Bell v. Lever Bros Ltd refused any equitable jurisdiction with regard to mistakes relating to the attributes or the quality of the agreement (Andrews, 2015, p.271). It is very challenging for any court, particularly in hard cases to separate cases that are voidable in equity and those that are voidable for a mistake at common law. Still, there are no clear requirements on how the equitable rescission right can function in common mistake cases (The University of the South Pacific, 2003). In the Solle v. Butcher, the court held that a mistake of any kind could render a contract void from the very beginning, and such mistakes are the purview of the common law. The court further added that a contract can be voided by equity if there was a common misapprehension between the parties either to their respective and relative rights or to the facts, on condition that the party asking for the contract to be set aside is not in the wrong and that the misapprehension was major (Phang, 2009, p.545). Even though judicial excuse for either mutual or unilateral mistake is fairly uncommon, mutual mistake has continually been cited by courts as basis for avoidance. Mutual mistake according to Rasmusen and Ayres (1993, p.310) has continually been cited as a separate doctrine and is used frequently in contract cases. Still, the relief offered by the English law for a mistake is very limited, and any type of mistake can get a relief as long as the other party induced the mistake through a positive misrepresentation or when the mistake is shared by both parties (Beale, 2014, p.41).

Before the Court of Appeal decision in Great Peace case, the English law as mentioned by Capper (2009, p.462) occasionally utilised the doctrine of mistake in equity, whereby a contract is rendered voidable at the request of the affected party. However, the English law is these days stanch to the “all or nothing” approach. Even though the “mistake in equity” provides a genuine probability of relief against factors that could destabilise the contractual bargains (such as common misassumptions), Capper (2009, p.462) posits that the doctrine was not utilised astutely and cannot, in any case, be aligned with Bell v. Lever Brothers. The only relief in English Law that can be used against the common misassumption that affects a contract is rendering the contract void. Still, exhibiting a common misassumption satisfactorily so as to arrive at such a conclusion is very challenging. Lord Phillips while making his judgment in the Great Peace case mentioned that there must be a common assumption with regard to the availability of a situation; therefore, non-existence of such a situation has to render the contract performance unfeasible. Evidently, this judgment has some connection with frustration, which is a doctrine that focuses on the supervening events that could further make the contract performance unmanageable. Capper (2009, p.463) believes that the Court of Appeal decision in the Great Peace case proves that ‘mistake in equity’ is no longer existing . The Court of Appeal reasoning in Graves v. Graves was to some extent disarrayed but the decision to void the tenancy agreement entered was correct since the tenant was eligible to the housing benefit. In the English contract law, the present ‘common mistake’ doctrine is very demanding since it needs proof showing the contract has been undermined.

According to Cartwright (2009, p.226), the English law of contract should be re-examined. Lord Atkin while making his judgment in Bell v. Lever Bros said the existence of a mistake in a contract operates to either nullify or negative the consent. This connotes that a mistake negatives the consent by preventing the parties from coming to an agreement and also cancels out the consent when the parties arrive at agreement. Until recently, equity had a broader scope but its effect was not far-reaching (Greenwood, 2004, p.497). The Court of Appeal in Great Peace case firmly rejected the power to void a contract in equity, which was sourced from Solle v. Butcher. According to the court, the parties involved in the Great Peace Shipping contract were misguided concerning the Great Peace location on the subject of evacuating the crew of another vessel. The parties deemed that the merchant’s vessel was ‘a stone’s throw away’ from the other vessel’ however, both parties were mistaken. Specifically, this led to a common mistake. The Court of Appeal established that the mistake was not operative since, although the distance between the Great Peace and the other vessel was big, the distance was not that enormous; therefore, Great Peace was capable of offering the needed service as stipulated in the contract. Before the decision in Great Peace Shipping, Solle had been followed in England for over 50 years. Equity was developed in England as a system for softening the rigour of the writ system. Importantly, the ‘equity’ rules had no intention of contradicting or replacing those of the Common law; rather, it added supplements and marginalia, glosses.

In English law, when the limit seems to be very strict, another remedy is normally pursued in equity as demonstrated in the Great Peace case. In the Great Peace Case, the Court of Appeal made a choice, which is not steered by the ins and outs of the doctrine of precedent. Certainly, the choice made by the court was clearly based on the view that the doctrine of equity is not satisfactory and, indubitably, the Lord Atkin reversion to the doctrine of the common law is an upgrading of the doctrine. Even so, McCamus (2004, p.83) argues that it is unsatisfactory that the emphasis placed in the court reasoning on the policy considerations that favouring varying versions of the doctrine of the common mistake are very little. Besides that, the Court of Appeal made the right decision to ignore the earlier decisions that applied the doctrine such as in the Solle v. Butcher. Certainly, the Court of Appeal has not offered a clear sign of its opinion on whether it could have embraced some particular facts, in case the doctrine of equity existed. Besides that, the court has not clearly shown how it would have used the doctrine of equity if it existed. So it was irrelevant for the court to discuss the very existence of the doctrine of equity when it does not apply to the case. As evidenced in Solle v. Butcher case, the equitable doctrine offers equitable solutions in the business environments and there is need to continue using it in the contract law. The court of appeal was correct not to use doctrine of the common mistake in equity, but it is inappropriate to disregard earlier decisions that had been made in the same court in Solle v. Butcher as well as Bell v. Lever Bros.


where no operative mistake has been established. In view of this, legislation should be enacted like that for frustration and misrepresentation so as to ensure the equitable doctrine continues to operate. Great Peace case, the doctrine still plays a meaningful role. Still, the equitable doctrine plays a crucial role in the areas of mutual and common mistake, but it is still unsatisfactory in situations likeGreat Peace case. As mentioned in the essay, a mistake can take place in different ways, and can be rectified if the intention of both parties is not recorded in the agreement. Evidently, the number of cases where both the parties to the contract are mistaken is very rare, but this type of contract as evidenced in the cited cases will become void if the mistake is adequately serious. In case one party makes a mistake with regard to the terms of the contract, and the other party becomes aware of the mistake, a binding agreement is not formed. In the English law, the focus is mostly on the primacy to certainty, whereby a relief is offered when the contract has been undermined to the extent that the contract is like an empty shell. In other jurisdictions, when common misassumptions take place, then it is the duty of the court to offer relief. Although misrepresentation may offer a more flexible and very satisfactory alternative to the mistaken doctrine, there are numerous cases, where the mistake offers the only promising remedy. Although the court of appeal ignored the doctrine of equity while making the decision in the Great Peace In conclusion, the essay has analysed the Beatson et al. assertion about the Court of Appeal decision in the


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