begins the negotiations assumes responsibility for the risks involved. Lord
Devlin, suggested in Ingram v Little that the court should apportion the loss
in some way between two innocent parties, but although his views have
merit they have not so far been acted upon.
The following recent case combines a number of the points raised above.
The court in Shogun disapproved of the policy approach of Lord Denning
in Lewis v Avery, in which he asked ‘Which is the better law?’ Lord Phillips
said that the innocent party ‘will have in mind, when considering with
whom he is contracting, both the person with whom he is in contact and the
third party whom he imagines that person to be’.
The court confirmed the outcome of Lewis v Avery, saying that there
should be a ‘strong presumption’ that each party intends to contract with
the other in situations where parties are in each other’s presence. This
could, on rare occasions, be rebutted, e.g. in a case of impersonation, where
the parties are known to each other.
Mistake over the law
Until recently a mistake over the law would not have led to a contract being
set aside, based on the argument that ignorance of the law was not an
excuse. However, in an increasingly complex legal environment it is
reasonable that if a contract is formed based on a mistaken understanding
of the law it is not really a true agreement. This view was taken by the
House of Lords in Kleinwort Benson v Lincoln City Council(1999) and
followed by the Court of Appeal in Brennan v Bolt Burdon(2005).
194 Contract law
Shogun v Hudson (2003)
A rogue obtained the driving licence of Mr Durlabh Patel of an address
in Leicester and went to buy a Shogun car saying he was Mr Patel. A
loan was obtained from Shogun Finance using Mr Patel’s identity for a
credit check. The rogue paid the deposit partly in cash and partly in a
cheque (which bounced) and drove it away. Later he sold the car to
Hudson for cash, and then vanished.
It was held by the House of Lords that there was no contract. Even
though the parties were in each other’s presence they only looked at the
details of Mr Patel. Identity materials were now ‘essential to the
checking of credit rating’. The court found that the ‘intention was to
accept an offer made by the real Mr Patel and no one else’. Although
Shogun appears to beinter praesentes– face to face – in reality the
contract was actually between Shogun Finance and the rogue –
therefore it was inter absentes. The waters are muddied, however, by
the fact that the transaction was given approval by the motor dealer in
the showroom.