Chapter 7Introduction to the law of contractof the champagne to pay for an evening at a night-club,
he could not be required to compensate the unpaid
seller.
Section 3(2) of the MCA 1987 expressly preserves the
remedies which were available before the MCA was
passed. The equitable doctrine of restitution allows an
adult to recover money or property acquired by a minor
as a result of fraud. The remedy is confined to restitution
of the actual property acquired. Thus, if a minor has
parted with the goods or the precise notes and coins, this
remedy is not available. In practice, adults seeking re-
stitution are likely to base their claims on the statutory
remedy contained in s 3(1) since it is not subject to the
same limitations which apply to the equitable remedy.
Drunks and mental patients
Section 3 of the Sale of Goods Act 1979 provides that
they are required to pay a reasonable price for neces-
saries in the same way as minors. Other kinds of con-
tract are governed by common law. If a person is
suffering from mental disability or drunkenness at the
time of making the contract, he will be able to avoid his
liabilities if he can show that he did not understand what
the agreement was about and the other person was
aware of his disability.
The judges of the Court of Protection may exercise
wide powers over the property and affairs of mental
patients placed in their care under the Mental Health
Act 1983. They can make contracts on behalf of the
patient and carry out contracts already made by him.
The Mental Capacity Act 2005 establishes a new stat-
utory framework to protect adults who lack mental
capacity and are unable to make their own decisions.
Section 7 of the 2005 Act provides that a person lacking
capacity must pay for necessary goods and services. The
Act came into force on 1 April 2007.
Genuineness of consent
The most basic requirement of a contract is the pre-
sence of an agreement. It must have been entered into
voluntarily and involved ‘a genuine meeting of minds’.
The agreement may be invalidated by a number of
factors – mistake, misrepresentation, duress and undue
influence.
Mistake
The general rule of common law is that a mistake does
not affect the validity of a contract. The guiding prin-
ciple is caveat emptor, which means ‘let the buyer beware’.
So if a person agrees to pay £1,000 for a car, when in
reality it is worth only £500, the contract is valid and he
or she must stand the loss. A mistake as to the quality of
the thing contracted for will not enable a party to escape
from the contract.231
Bellv Lever Bros Ltd(1932)B and S had entered into five-year contracts to act as
chairman and vice-chairman respectively of a company
in which LB Ltd had a controlling interest. LB Ltd wished
to dispense with their services and, because they still
had some time to run on their contracts, it was agreed
that B and S would receive £30,000 and £20,000 respect-
ively for loss of office. Unknown to LB Ltd, B and S had
been engaged in activities which would have entitled LB
Ltd to terminate their contracts without compensation for
breach of contract. LB Ltd sought to recover the money
it had paid to B and S on the ground that the agreement
to pay them compensation was void for mistake. The
House of Lords held by a majority of three to two that
this was a case of common mistake, i.e. both parties had
made the same mistake. (B and S had managed to con-
vince a jury that when they had agreed to compensation
for loss of office, they had forgotten about their previous
misconduct. Both parties thought B and S were entitled
to compensation.) LB Ltd got what it bargained for – the
termination of B’s contract and S’s contract. LB Ltd was
mistaken about the qualities of B and S, but this kind of
mistake does not invalidate a contract.
Comment. In 1949 in SollevButcherDenning LJ in the
Court of Appeal argued that in cases of common mistake
where the contract is valid at common law, a court may
intervene and rescind the agreement on terms in exercise
of its equitable jurisdiction. In a more recent case the
Court of Appeal reviewed the apparent conflict between
the decision of the House of Lords in Belland the
approach taken by the Court of Appeal in Solle. In Great
Peace Shipping LtdvTsavliris (International) Ltd(2002),
the defendants offered to provide salvage services to a
ship called the Cape Providencewhich had got into diffi-
culties in the South Indian Ocean. They asked hirers (H)
to find a vessel which was close to the Cape Providence