Unilateral mistake

This occurs where only one of the parties to the agreement is mistaken as to the circumstances of the contract, and the other party is aware of that fact.

            Most cases of unilateral mistake also involve misrepresentation  although this need not necessarily be so. It is important to distinguish between these two elements: whereas unilateral mistake makes a contract void and thus prevents the passing of title in any property acquired under it, misrepresentation merely makes a contract voidable and good title can be passed before the contract is avoided. This distinction will be seen in Ingram v Little and Phillips v Brooks A further important distinction relates to remedies available: damages are not available for mistake but, where there has been a misrepresentation, damages may be awarded.

            The cases involving unilateral mistake relate mainly to mistakes as to identity. A contract will only be void for mistake where the seller intended to contract with a different person from the one with whom he did actually contract.

            In Cundy v Lindsay a crook named Blenkarn ordered linen handkerchiefs from Lindsay & Co, a Belfast linen manufacturer. His order, from 37 Wood Street, was signed to look as if it were from Blenkiron & Co, a reputable firm which was known to Lindsay and which carried on business at 123 Wood Street. The goods were sent to Blenkarn, who sold them to Cundy. Lindsay successfully sued Cundy in the tort of conversion. It was held that Lindsay had intended only to deal with Blenkiron & Co, so the contract was void. Since there was no contract with Blenkarn, he received no title whatsoever to the goods and, therefore, could not pass title on to Cundy. The case is generally taken to indicate that, if you do not deal face to face, the identity of the other party is fundamental. This was confirmed in Shogun Finance Ltd v Hudson  despite the fact that the decision defeated the objective of s 27 of the Hire Purchase Act 1964 to protect the innocent third party purchaser of a hire purchase motor vehicle. In that case, a con man obtained a car on hire purchase, using the identity of a Mr Patel, via a stolen driving licence. His contract was with the finance company, not the garage with whom he negotiated, so he did not deal face to face. The con man sold the car to Hudson and disappeared without paying the hire purchase instalments. The finance company sought damages in the tort of conversion from Hudson, on the basis that he had no title to the car. It should be noted that where goods are acquired on hire purchase, ownership does not pass until all instalments are paid, so that the con man had no title to pass to Hudson. However, s 27 gives title to the innocent third party purchaser of a motor vehicle from a ‘debtor’ who acquired it on hire purchase. Nevertheless, the Court of Appeal held that, as the contract was not made face to face, the contracting party’s identity was crucial, so the hire purchase contract was void for mistake. As it was void, there was no ‘debtor’ within the meaning of s 27; Hudson was not protected and was liable in conversion. An appeal to the House of Lords in 2003 was dismissed, confirming, by a bare majority, that s 27 did not operate to give good title to Mr Hudson. Also of interest were dicta relating to impersonation by telephone, videophone and by e-shopping.