(1867) a lease was drawn up to transfer a fishery, and unknown to both
parties at the time, the buyer was already the owner. It was held that the
contract was void for mistake, but that the party who thought that he had
been the owner should have a lien on the property (a legal right over it) until
he had received a sum of money to compensate for what he had spent on
repairs and maintenance. This is a good example of the courts using their
equitable powers to bring about a suitable remedy, when the common law
remedy would not be satisfactory.
Mistake over quality of subject matter
The general position is that where the mistake of the parties merely results in
a bad bargain for one of them, the contract will not be void. This is consistent
with the principle that the law only requires sufficiency of consideration, not
the normal market value. This arose in the following leading case.
Lord Atkin stated in the case the principles on which the court would judge
whether a mistake was over existence or quality of subject matter. He said,
In such a case a mistake 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.So the court is looking for a fundamental quality which makes the contract
essentially different from what was expected, but decided in the case of Bell
v Lever Bros that the giving away of £30,000 did not come into that
category. Given that the case was heard in 1932, it must be concluded that
188 Contract law
Bell v Lever Bros (1932)
Lever Bros wanted to dispense with the services of Bell, who was a
senior member of staff, managing one of their enterprises abroad. They
thought that they were obliged to make a large settlement to persuade
him to leave – a ‘golden handshake’ – and in fact gave him £30,000.
They then found out that the payment need not have been made,
because some time before he had behaved in such a way that they could
have ended his contract anyway. Lever Bros argued that they had
formed the contract to pay the golden handshake under a mistake
which was fundamental. However, the House of Lords disagreed,
although it was by a majority of 3 to 2, saying that the contract was to
terminate the employment, and that was what had been achieved. It was
only the cost which would have been different. The contract was
therefore not impossible to perform, just a bad bargain for Lever Bros.