It used to be the case that a mistake of law would not
invalidate a contract on the basis that everyone is pre-
sumed to know the law (a principle expressed in the
Latin as ignorantia juris non excusat). However, in
Kleinwort Benson Ltdv Lincoln City Council(1998), the
House of Lords took the view that ‘the rule precluding
recovery of money paid under a mistake of law could no
longer be maintained’ (see p 260 ) for a fuller discus-
sion of the decision in Kleinwort).
There are some kinds of mistake which so undermine
the agreement that the contract is void. If this is the case,
no rights of ownership can pass and any goods which
have changed hands can be recovered. A mistake will
invalidate the contract in the following situations:
1 Mistakes as to the subject matter of the contract.
The parties may be mistaken as to the identity of the
subject matter. If a seller makes an offer in respect of one
thing and the buyer accepts, but is thinking of some-
thing else, the parties are clearly talking at cross-
purposes and there is no contract.Part 3Business transactions
232
and willing to assist with the evacuation of the crew. H
was advised that the Great Peacewas the nearest
vessel, and on this basis entered into a charter with the
owners of the Great Peacefor a minimum of five days
while it diverted to help the Cape Providence. After the
contract was concluded, the defendants discovered that
the Great Peacewas 400 miles away from the Cape
Providenceand there was another vessel much closer.
The defendants refused to pay for the hire of the Great
Peaceon the grounds that the charter was void at com-
mon law for mistake and/or the charter was voidable for
a ‘common’ mistake and could be rescinded in equity.
The Court of Appeal held this was a case of common
mistake as in Bell. The court took the view that it was not
possible to reconcile Sollewith Belland the previous
decision of the Court of Appeal in Solleshould be dis-
regarded. In the present case, the distance between the
two vessels was not so great as to confound the com-
mon assumption of both parties that the vessels were
sufficiently close to each other to allow the Great Peace
to carry out the service for which she had been char-
tered. The contract for the hire of Great Peacewas valid
and the defendants were liable to pay the hire charges.Leafv International Galleries(1950)Mr Leaf bought a painting of ‘Salisbury Cathedral’ from
International Galleries for £85. The gallery attributed the
painting to John Constable. When Leaf tried to sell the
painting five years later, he was informed that it was not
by Constable. Both the buyer and seller had made a mis-
take about the quality and value of the painting but this
did not affect the validity of the contract.Rafflesv Wichelhaus(1864)The defendant agreed to buy cotton which was described
as ‘arriving on the Peerlessfrom Bombay’. There were
two ships called the Peerlesssailing from Bombay: one
in October and the other in December. It was held that
there was no binding contract between the parties as the
defendant meant one ship and the claimant the other.When the parties contract in the mistaken belief that
a particular thing is in existence, but in fact it has ceased
to exist, the contract is void. These situations are known
as cases of res extincta.Couturierv Hastie(1856)A contract was made for the sale of Indian corn which the
parties believed to be on board a ship bound for the UK.
Unknown to the parties, the corn had overheated during
the voyage and been landed at the nearest port and sold.
The House of Lords held that the agreement was void.The common law res extinctarules are reflected in the
provisions of the Sale of Goods Act 1979. Section 6 pro-
vides: ‘where there is a contract for the sale of specific
goods and the goods without the knowledge of the seller
have perished at the time when the contract is made, the
contract is void’. In some situations, the non-existence
of the subject matter will not render the contract void. A
court may be prepared to place responsibility for non-
existence on one of the parties.McRaev Commonwealth Disposals
Commission(1951)
The Commission contracted to sell to McRae the wreck
of an oil tanker which was described as lying on Jour-
mand Reef off Papua. McRae incurred considerable ex-
penditure in preparation for the salvage operation. In
fact, there was no tanker anywhere near the specified
location and no place known as Jourmand Reef. The