In situations of common mistake it cannot really be said that there is ever
any true agreement between the parties. There is no consensus ad idem –
meeting of minds – and it could be argued that the contract had not
therefore been correctly formed. This is certainly true where the mistake is
over existence of the subject matter, which is why the courts find the
contract void. However, in cases involving mistake over quality it could be
argued that the main terms of the contract are clear, and it is only the
intrinsic value that is under dispute, leaving the contract itself intact.
Mutual mistake
In mutual mistake, the parties are not really in agreement right from
the outset, as they make different assumptions in forming the contract.In such cases if there is total ambiguity the contract is held void, as in the
following case.
190 Contract law
Great Peace Shipping v Tsavliris Salvage (2002)
Solle v Butcher had extended the test in Bell v Lever Bros (a mistake
must be over ‘some quality which makes the thing without the quality
essentially different from the thing as it was believed to be’). The test
was now whether the mistake was ‘fundamental’ – much more an
equitable decision of a judge on grounds of fairness or equity. Great
Peace said that there should not be this distinction. The test in Bell is to
stand until such time as legislation changes the doctrine.
There must be (according to Lord Phillips):- a common assumption over a state of affairs
- no warranty by either party that the state of affairs exists
- non-existence of the state of affairs must not be the fault of either
party - non-existence of state of affairs makes performance impossible.
A state of affairs may be the existence of, or a vital attribute of,
consideration.
Raffles v Wichelhaus (1864)
An agreement was made to buy a cargo of cotton, on a ship named
Peerless, sailing from Bombay to England. There were actually two
ships of the same name, both loaded with cotton, one of which left
Bombay in October, and one in December. As the parties were
completely at cross-purposes it could not be decided which ship had