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Consensus Mistake and Impossibility in Contract

Published online by Cambridge University Press:  16 January 2009

H. W. R. Wade
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Extract

The boundary between the fields of mistake and impossibility in contract seems never yet to have been critically surveyed. But such a survey is badly needed, for it is plain that at the moment the law of mistake is in no less a state of confusion than is the law of impossibility or ‘frustration’. The outstanding case of recent years, Bell v. Lever Bros., Ltd. (1931), met with such universal and (if it may humbly be said) unmerited hostility from publicists in all quarters that this alone calls for an inquiry into the difficulties of the subject. There, has been a disturbing tendency among text-writers, led by Pollock, to profess an inability to understand the ratio deddendi of the case, to try to limit it for the future to its exact facts, and to refuse to recognize in it any legal principle.

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The Cambridge Law Journal , Volume 7 , Issue 3 , November 1941 , pp. 361 - 378
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Copyright © Cambridge Law Journal and Contributors 1941

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References

1 But see F. H. Lawson in 52 L. Q. R. 79 for some valuable preparation of the ground.

2 [1932] A. C. 161.

3 In a remarkable interdict (Contract, 10th ed., p. 498): ‘I will even venture to hope that in the next generation our successors will put it on the shelf as one of those decisions in which it is unsafe to put one's trust as settling any general principle.’ Cf. Anson, , Contract (18th ed.) p. 147.Google Scholar For yet further disapprobation see 48 L. Q. R. 148 (H. C. G.); and for an attempt to substitute a different ratio deddendi see 51 L. Q. R. 650 (P. A. Landon), sufficiently refuted in 63 L. Q. R. 118 (C. J. Hamson). Williston on Contracts, s. 1570, n. 3, is also hostile to the decision. A lone voice of approval is raised in 52 L. Q. R. 27 (T. H. Tylor).

4 See the words of Lord Atkin cited immediately below.

5 See Broughton v. Sandilands (1811) 3 Taunt. 342;Google Scholar Salmond & Winfield, Contracts, p. 195.

6 The view of Lord Haldane in the Tamplin Case [1916] 2 A. C. at pp. 406–7,Google Scholar was adopted by Goddard, Goddard. in Tatem v. Gamboa [1939] 1 K. B. 132.Google Scholar See the present writer, The Principle of Impossibility in Contract, 56 L. Q. E. 519.

7 [1932] A. C. at p. 217.

8 From the examples then given there does not seem to be any difference between consent which is ‘negatived’ and that which is ‘nullified’, except that the former term is preferred for cases of mistake as to the person, the latter where there is error as to the existence of the thing contracted for.

9 By consensus is meant the element of agreement, or apparent agreement, which makes a contract binding. This must be distinguished from ‘consent's criticism of Williston's ‘objective’ view: Legal Essays, 216.

12 Identity of a contracting party falls within these phrases. See the discussion at the end of this article, especially the penultimate paragraph, for the inclusion of description of identity within the terms of the contract.

13 L. E. 2 H. L. at p. 170.

14 Though the wide rules with which these cases are associated are by no means necessary to the decisions reached. See notes 42 and 43, post.

15 [1903] 2 Ch. at p. 252.

16 Ibid, at p. 253.

17 The House of Lords explored the subject in two Scottish cases, Stewart V. Kennedy (1890) 15 App. Cas. 75,Google Scholar and Shankland v. Robinson [1920] S. C. (H. L.) 103,Google Scholar and approved a passage from Bell's Principles of the Law of Scotland classifying types of error which are ‘error in substantials‘the quality of the thing engaged for, if expressly OF tacitly essential”, there is little help in the passage.

18 In Bell v. Lever Bros., Ltd. [1932] A. C. at p. 236.Google Scholar

19 [1918] A. C. at p. 128. Lord Atkin's reference is at [1932] A. C. p. 226.Google Scholar

20 [1932] A. C. at p. 227.

21 [1903] 2 K. B. 740.

22 See Holmes, , The Common Law, pp. 314–5:Google Scholar ‘If there is a mistake as to a fact not mentioned in the contract, it goes only to the motives for making the contract.'

23 Messrs. Levers had paid sums totalling £50,000 to the two appellants as compensation for terminating their services as chairman and vice-chairman of the directors of one of Levers’ subsidiary companies. Levers then discovered that the appellants, while in their employment, had been guilty of breaches of duty for which their service agreements might have been summarily determined without notice or compensation. There was found to be no fraud in the appellants.

24 [1931] 1 K. B. at p. 564. And Lord Wright, in Legal Essays, 214, says: ‘I think the decision turned on what in all such cases is the real problem, whether the mistake was sufficiently basic’ These last two words are, with all deference, typical of the traditional terminology from which so much confusion has resulted.

25 An American case, Wood v. Boynton (1885) 54 Am. Kep. 610Google Scholar is a good illustration. There the plaintiff showed to the defendant a stone, saying that she had been told it was a topaz, and the defendant, who was a jeweller, offered her a dollar for it. Some time later she accepted. The stone turned out to be a rough diamond, worth about $700. Taylor J. said: ‘If she chose to sell it without further investigation as to its intrinsic value to a person who was guilty of no fraud or unfairness which induced her to sell it for a small sum, she cannot repudiate the sale because it is afterwards ascertained that she made a bad bargain.’ See also the dissenting judgment of Sherwood, J. in Sherwood v. Walker (1887) 11 Am. St, Bep. 531, which embodies these principles.Google Scholar

26 [1932] A. C. at pp. 223–4.

27 1 B . 4 P. N. R. 260. The defendant, who had obtained a patent for an invention which he supposed to be his own, granted the use of it, during the currency of the patent, to the plaintiff, payment to be by an annual sum secured by bond. This sum was paid for several years, until the plaintiff discovered that the invention was not the defendant's, but had been in public use before the patent had been obtained. The patent, however, had never been repealed.

28 Ibid, at p. 262.

29 Ibid, at pp. 262–3.

30 Cf. Chanter v. Dewhurst (1844) 12 M. & W. 823,Google Scholar and Lawes v. Purser (1856) 6 E. & B. 930.Google Scholar

31 15 M. & W. 486. The defendant, a share broker, bought for the plaintiff scrip certificates which were on the market as ‘Kentish Coast Railway scrip’ and were signed by the secretary of the company. Later the directors repudiated the scrip, as having been issued by the secretary without authority. The plaintiff thereupon sued for the price he had paid.

32 Ibid, at p. 488.

33 Contrast Young v. Cole (1837) 3 Bing. N. C. 724,Google Scholar where bonds sold as ‘Guatemala bonds’ were held to have been offered as ‘real Guatemala bonds, such as were saleable on the stock exchange’ (per Tindal C.J. at p. 730). He said: ‘It is not a question of warranty; but whether the defendant has not delivered something which, though resembling the article contracted to be sold, is of no value.’ Bosanquet J. said: ‘The bonds he delivered to the plaintiff were not Guatemala bonds, but, on the stock exchange, worthless paper.'

34 L. K. 2 Q. B. at p. 589. The defendant company, who carried mails under contract with the Government of New Zealand, issued a prospectus of new shares to enable it to perform ‘the contract recently entered into with the Government of New Zealand’ for additional mail services. In fact the contract referred to had not been concluded, though both parties honestly and reasonably believed that it had. The plaintiff had taken shares on the faith of the prospectus, and sued to recover the instalments he had paid. The company brought a cross-action for a call on the shares.

35 For at that time the Court could not have rescinded the contract on grounds of innocent misrepresentation, and the plaintiff had to prove absence of consensus. This is no longer law since the Judicature Acts: see Scrutton L.J. in [1931] 1 K. B. at p. 588.

36 L. R. 2 Q. B. at p. 589.

37 Pollock (Contract, p. 498) tries to distinguish Bell v. Lever Bros. Ltd. in this respect, and talks of ‘the imaginary claim to compensation’ being ‘surely of no value in law”. But of course the claim, so far from being imaginary, was based on a valid service agreement, and the mistake of the company as to its value was just like that in Wood v. Boynton, note 25 above.

38 30 T. L. E. 531. The plaintiff and defendant, believing (as was not the fact) that they were lawfully married, had entered into a deed of separation. The case is scantily reported, but it is clear that there was mention in the deed of the supposed fact that the parties were husband and wife, for one of the contentions of counsel for the respondents was that the recitals in the deed raised an estoppel against the party alleging the invalidity of the marriage.

39 F. H. Lawson, 52 L. Q. R. at p. 86.

40 See also Gompertz v. Bartlett (1853) 2 B. & B. 849Google Scholar and Gurney v. Womersley (1854) 4 E. & B. 133.Google Scholar In neither of these cases could the thing promised (in each case a specific bill) have been delivered as described to the offeree.

41 It has commended itself to a number of authorities: see Anson, , Contract (18th ed.) p. 144;Google Scholar Lawson, 52 L. Q. E. at pp. 84–5; Lord Atkin in [1932] A. C. at pp. 218 (on Cooper v. Phibbs) and 222 (on Smith v. Hughes).Google Scholar

42 E.g. Kennedy v. Thomassen [1929] 1 Ch. 426 (adopting, in an alternative ratio decidendi, Strickland v. Turner (1852) 7 Ex. 208).Google ScholarScott v. Coulson was in effect a common law case—see p. 4 above.

43 E.g. Bingham v. Bingham (1748) 1 Ves. Sen. 126;Google ScholarCochrane v. Willis (1865) L. R. 1 Ch. 58;Google ScholarCooper v. Phibbs (1867) L. E. 2 H. L. 149.Google Scholar

44 The contract was for the sale of a cargo of corn which had in fact been spoiled and disposed of before the date of the agreement, making performance impossible.

45 P. 364 above.

46 Note 42 above.

47 The Common Law, pp. 323–4.

48 L. E. 6 Q. B. 597.

49 Hughes in 54 L. Q. E. 372.

50 2 H. & C. 906.

51 Pothier, , Traité des Obligations, s. 19,Google Scholar referred to by Fry, J. in Smith v. Wheatcroft (1878) 9 Ch. D. at p. 230,Google Scholar and by other judges in a number of later cases.

52 See Boulton v. Jones (1857) 2 H. & N. 564.Google Scholar There A had a special interest in contracting with B, as he wished to plead a set-off against B. But Pollock C.B. stated the general rule that ‘if a person intends to contract with A, B cannot give himself a right under it’ (at p. 565), and this was the construction put upon the case by Cockburn, Cockburn.C in British Waggon Co. v. Lea (1880) 5 Q. B. D. at p. 152.Google Scholar

53 Thus in Cundy v. Lindsay (1878) 3 App. Cas. 459,Google Scholar one of the clearest cases, B induced L to think that he was ‘Blenkiron & Co., 37 Wood Street, Cheapside‘no consensus of mind which could lead to any agreement or any contract whatever’ (Lord Cairns L.C. at p. 465). Contrast King's Norton Metal Co. v. Edridge (1897) 14 T. L. K. 98,Google Scholar where W represented himself as a fictitious firm, H. & Co., and ordered goods by post from the plaintiffs. A. L. Smith L.J. held that the supposed firm was no part of the indicia of identity of W, as the plaintiffs clearly intended to contract with the writer of the letters. In Cundy v. Lindsay L had intended to contract with a specific firm, which had in fact a different address to that which Ii made reference. In the King's Norton Case the alleged firm did not apparently influence the plaintiff's conception of W i identity, but merely induced him to place confidence in the writer of the letters. But this is hardly an adequate explanation on the facts as reported. Even if the plaintiffs intended to contract with the writer of the letters, they in fact purported to contract with H. & Co., a non-existent entity. Who then were the parties as specified in the contract?

54 But quaere, whether it is not necessarily so used where the contract is committed to writing, even though the parties are face to face. They will be unable to go behind the written document, and the contract must stand or fall by the written descriptions of the identities of the parties. If these are false, no agreement can be construed out of the document. This is the same difficulty as that in the King's Norton Case.

55 135 Mass. 283 (headnote).

56 [1919] 2 K. B. at p. 246.

57 Aliter, probably, where the name given is imaginary and the contract i* oral. Lord Sumner's ‘confidence trick man, posing as a benevolent millionaire from the United States’ ([1927] A. C. at p. 506) might surely use his confidence trick purely as an inducement to contract, and not as part of his identity. If heused a purely imaginary name the indicia of identity on which the other party relied would not include this.

58 [1927] A. C. 487. The issue was whether goods had been ‘entrusted’ to a person within the meaning of an exceptions clause in a Lloyd's policy of insurance against theft. But the consent necessary for entrusting was held the same as for contract.

59 There are difficulties where A, acting for B, buys from C, whom he knows to be unwilling to sell to B. In Nash v. Dix (1898) 78 L. T. 445,Google Scholar C refused an offer from B, but accepted a less favourable one from A. A had been induced to buy by B, who undertook to buy from him at a stated profit. North J. decreed specific performance, finding that A bought not as agent of B, but for himself with a view to re-sale to B. Would the result have been different if A had been B's agent? Where the principal is undisclosed the contract is good against the agent, and there is no question of mistaken identity. Yet in Said v. Butt [1920] 3 K. B, 497,Google Scholar McCardie J. said of such a case, ‘the personal element was here strikingly present”. A had bought from C a ticket for the first performance of a play, acting as agent for B, the persona non grata. Despite the emphasis placed by the learned judge on the almost private nature of a first performance, it is notorious that theatre tickets are transferable. There is no rational distinction between an agent and one who acts for himself, though with a view to immediate re-sale to a certain individual. But the law as to undisclosed principals is in any case anomalous, and Said v. Butt, if followed, may represent a special rule.

60 [1939] 4 All B. E. 478.

61 As the lease was induced by what the learned judge found to be a fraudulent change of name it was of course voidable at the instance of the party deceived (Gordon y. Street [1899] 2 Q. B. 641).Google Scholar But the suggestion there made (by A. Li. Smith L.J.) that the contract might be void ab initio does not support the use made of it by Tucker J. at p. 481. In Gordon v. Street the fraudulent party used a fictitious name (as the learned Lord Justice assumed), and as the contract seems to have been made through the post there might have been a mistake of identity, though the case was not concerned with this point.