Vitiating Factors: Mistake

Mistake is one of the most difficult vitiating factors in contract law. Unlike misrepresentation (where one party is misled by the other), mistake concerns situations where one or both parties enter a contract under a fundamental misunderstanding — without any fault by the other party. The doctrine of mistake at common law is narrow: the courts are reluctant to allow parties to escape from contracts merely because they made a bad bargain. If mistake operates, the contract is void ab initio (from the beginning) — as if it never existed.

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Categories of Mistake

There are three main categories of operative mistake at common law:

Category	Description	Effect
Common mistake	Both parties share the same mistake about a fundamental fact	Contract may be void
Mutual mistake	Both parties are mistaken, but about different things — a cross-purposes misunderstanding	Contract may be void
Unilateral mistake	One party is mistaken and the other knows (or ought to know) of the mistake	Contract may be void

graph TD
    A["MISTAKE"] --> B["Common Mistake"]
    A --> C["Mutual Mistake"]
    A --> D["Unilateral Mistake"]
    B --> E["Both parties share<br/>the SAME mistake<br/>about a fundamental fact"]
    C --> F["Parties at<br/>CROSS-PURPOSES —<br/>different mistakes"]
    D --> G["ONE party is mistaken<br/>and the other KNOWS<br/>of the mistake"]
    E --> H["Res extincta: Subject<br/>matter does not exist<br/>Res sua: Party already<br/>owns the subject matter"]
    F --> I["Contract void if<br/>reasonable person could<br/>not determine the<br/>parties' intentions"]
    G --> J["Mistake as to<br/>IDENTITY or<br/>TERMS"]

    style B fill:#3498db,color:#fff
    style C fill:#f39c12,color:#fff
    style D fill:#e74c3c,color:#fff

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Common Mistake

A common mistake (also called "shared mistake") occurs where both parties enter the contract based on the same false assumption about a fundamental matter. For common mistake to render a contract void, the mistake must be fundamental — it must go to the root of the contract.

Res Extincta — The Subject Matter Does Not Exist

Where both parties believe that the subject matter of the contract exists, but it has already been destroyed or never existed, the contract may be void for common mistake.

This principle is partly codified in s6 of the Sale of Goods Act 1979: "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 Couturier v Hastie (1856), a contract was made for the sale of corn that was being shipped from Salonica. Unknown to both parties, the corn had already been sold by the ship's captain because it had begun to perish. The House of Lords held the contract was void — the subject matter had ceased to exist.

Res Sua — A Party Already Owns the Subject Matter

Where a party contracts to buy something they already own, the contract is void for common mistake.

In Cooper v Phibbs (1867), a man agreed to lease a fishery that, unknown to either party, he already owned. The House of Lords held the agreement was void.

Common Mistake as to Quality

The courts have been very reluctant to allow common mistake to apply where the mistake relates to the quality or value of the subject matter rather than its existence.

Bell v Lever Brothers Ltd [1932]:

This is the leading case. Lever Brothers paid Bell (a senior employee) £30,000 as compensation for early termination of his employment contract. Both parties were unaware that Bell could have been dismissed for nothing because he had committed breaches of his employment contract. The House of Lords held that the contract of termination was not void for common mistake. Lord Atkin stated the test:

The mistake must render the subject matter of the contract "essentially and radically different" from what the parties believed.

Here, Lever Brothers had contracted to terminate Bell's employment, and that is exactly what they received — the difference was merely in the quality or value of what they got.

Great Peace Shipping Ltd v Tsavliris Salvage (International) Ltd [2002]:

The Court of Appeal confirmed and clarified the test from Bell v Lever Bros. A vessel was in distress and the defendants hired the Great Peace to provide assistance, believing it was nearby. In fact, it was several hundred miles away. The court held:

1. The doctrine of common mistake at common law operates within narrow limits
2. The mistake must render performance of the contract impossible (not merely more difficult or less desirable)
3. The test is whether the situation is essentially and radically different from what the parties supposed
4. There is no separate equitable jurisdiction to set aside contracts for common mistake (overruling the earlier decision in Solle v Butcher [1950])

Here, the Great Peace could still have provided assistance, even if less quickly than expected. The contract was not void.

Case	Facts	Void?	Reason
Couturier v Hastie (1856)	Corn already sold — did not exist	Yes	Res extincta
Cooper v Phibbs (1867)	Leased fishery already owned by buyer	Yes	Res sua
Bell v Lever Bros [1932]	Paid £30k compensation — could have dismissed for free	No	Not essentially different — just quality/value
Great Peace Shipping [2002]	Ship 400 miles away, not nearby	No	Still possible to perform — not fundamentally different

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Mutual Mistake

A mutual mistake occurs where the parties are at cross-purposes — each party is mistaken about a different matter, resulting in a failure to reach genuine agreement.

Raffles v Wichelhaus (1864):

This is the leading case. The contract was for the sale of cotton to be shipped on the "Peerless" from Bombay. Unknown to both parties, there were two ships called "Peerless" — one sailing in October and one in December. The buyer meant the October ship; the seller meant the December ship. The court held the contract was void because there was no genuine agreement — no consensus ad idem (meeting of minds).

The test for mutual mistake is objective: would a reasonable person have been able to determine which meaning the parties intended? If a reasonable person would have understood the contract to refer to one particular ship, the contract is valid on those terms. The contract is only void if the ambiguity is truly irresolvable.

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Unilateral Mistake

A unilateral mistake occurs where only one party is mistaken and the other party knows (or ought to know) of the mistake.

Mistake as to Identity