Mistakes in English law

Mistake is a term of art in both contract law and criminal law in England and Wales.

Mistakes are a group of rules in English contract law, which happen to share the same name. If the law deems a mistake to be sufficiently grave, then a contract entered into on the grounds of the mistake may be void. A mistake is an incorrect understanding by one or more parties to a contract. There are essentially three types of mistakes in contract,

Res Sua, there is a mistake as to the title/name of an involved party (where the subject matter already belongs to oneself for example)

Res Extincta, where subject matter does not exist

Mistake as to identity occurs when one party – usually deceived by a "rogue" – believes themselves to be bargaining with another, uninvolved, third party. In a typical situation of this kind, the contract will either be void for mistake, or voidable for fraud. Such a distinction depends on the manner in which the contract was made. There are two types: (1) Contract made inter absentes, when the parties do not meet face-to-face, e.g. through correspondence; and (2) Contract made inter praesentes -- when the parties meet face-to-face One commentator states "'[t]here are few more vexed areas of contract law' than mistake of identity." The English approach provides less protection to the purchaser from a rogue than American law.

A Contract made inter absentes occurs when the parties do not meet face-to-face, e.g. through correspondence.

Cases:

In this leading case, Lindsay & Co sold handkerchiefs to a rogue pretending to be an existent and reputable firm Blenkiron & Co (they were dealing by correspondence). The contract was held to be void for mistake because Lindsay & Co had intended to contract with Blenkiron & Co, not the rogue. Lindsay & Co were able to recover the handkerchiefs from a third party who had purchased them from the rogue (as the rogue did not have good title to pass on to them).

In similar situation similar to the preceding case, except that rogue used the name of a non-existent company. The seller could not claim they had intended to contract with the non-existent company, so the contract was merely voidable for fraud, and the third party obtained good title to the goods.

Although Cundy v Lindsay and Phillips v Brooks have had a difficult co-existence which has led to confusion (e.g. Ingram v Little,) the principle was upheld by a 3:2 majority in the House of Lords decision of Shogun Finance Ltd v Hudson. The minority of Lord Nicholls and Lord Millett argued strongly for the abandonment of Cundy v Lindsay and in favour of the principle that all mistakes for identity merely render a contract voidable; for instance, Lord Nicholls argued that the loss should be borne by the seller, "who takes the risks inherent in parting with his goods without receiving payment", rather than by the innocent third party.

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