[2004] 1 A.C. 919
Shogun Finance Ltd v. Hudson
House of Lords
2003 July 14, 15; Nov 19
*919 Shogun Finance Ltd v. Hudson
House of Lords
HL
Lord Nicholls of Birkenhead, Lord Hobhouse of Woodborough, Lord Millett, Lord
Phillips of Worth Matravers and Lord Walker of Gestingthorpe
2003 July 14, 15; Nov 19
Hire--purchase--Hire--purchase agreement--Title to goods--Dealer proposing sale of
car to fraudster producing stolen driving licence--Claimant finance company accepting
details on licence and draft agreement and agreeing purchase after credit check-Dealer receiving deposit and parting with car to fraudster--Defendant purchasing in
good faith from fraudster--Whether property in vehicle vesting in fraudster as
"debtor"--Whether title passing to innocent purchaser--Whether contract void or
voidable--Hire--Purchase Act 1964 (c 53), ss. 27(1)(2), 29(4) (as substituted by
Consumer Credit Act 1974 (c 39), s. 192(3)(a), Sch. 4, para 22)
A dealer agreed a price for the sale of a motor vehicle on hire-purchase to a fraudster
who produced a stolen driving licence as proof of his identity. The dealer faxed to the
claimant hire-purchase company a copy of the licence and a draft hire-purchase
agreement that the fraudster had signed, forging the signature on the licence. Having
completed a satisfactory credit check of the person named on the licence the claimant
approved the sale. The fraudster paid the agreed 10% deposit to the dealer partly in
cash and partly by way of a cheque, which was subsequently dishonoured, and was
allowed to take the vehicle. The defendant purchased it in good faith from the
fraudster the following day. On the claimant's action against the defendant for, inter
alia, damages for conversion the defendant counterclaimed that he had acquired good
title to the vehicle within the meaning of section 27 of the Hire-Purchase Act 1964
[FN1]. The judge gave judgment for the claimant, and the Court of Appeal by a
majority dismissed the defendant's appeal.
FN1 Hire-Purchase Act 1964, s. 27(1)(2), as substituted: see post, para 14.S 29(4),
as substituted: see post, para 43.
On appeal by the defendant-Held, dismissing the appeal (Lord Nicholls of Birkenhead and Lord Millett dissenting),
that under section 21(1) of the Sale of Goods Act 1979 the title to the vehicle had at
all material times been in the claimant and accordingly the defendant could not have
acquired title to it from the fraudster save under the provisions of section 27 of the
1964 Act; that the purported contract between the fraudster and the claimant was
constituted by the hire-purchase agreement under which the hirer purported to be the
person named on the driving licence, and oral evidence could not be adduced to
contradict the terms of the written agreement so as to demonstrate that, in a face-toface transaction, the fraudster had been the true hirer; that, in any event, there had
not been the necessary consensus ad idem between the fraudster and the finance
company; and that, accordingly, the fraudster had not been the debtor under the
agreement within the meaning of section 29(4) of the 1964 Act and the defendant
had not acquired title to the vehicle under the provisions of section 27 (post, paras
42-47, 49-50, 117, 119, 166-170, 178, 180, 183, 191, 193).
Cundy v Lindsay (1878) 3 App Cas 459, HL(E), Phillips v Brooks Ltd [1919] 2 KB 243,
Ingram v Little [1961] 1 QB 31, CA, Lewis v Averay [1972] 1 QB 198, CA and Hector
v Lyons (1988) 58 P & CR 156, CA considered.
Decision of the Court of Appeal [2001] EWCA Civ 1000; [2002] QB 834; [2002] 2
WLR 867; [2002] 4 All ER 572 affirmed.
*920 The following cases are referred to in their Lordships' opinions:
Babcock v Lawson (1880) 5 QBD 284, CA
Bank of Australasia v Palmer [1897] AC 540, PC
Basma v Weekes [1950] AC 441; [1950] 2 All ER 146, PC
Boulton v Jones (1857) 2 H & N 564; 27 LJ Ex 117
Branwhite v Worcester Works Finance Ltd [1969] 1 AC 552; [1968] 3 WLR 760;
[1968] 3 All ER 104, HL(E)
Collins v Associated Greyhound Racecourses Ltd [1930] 1 Ch 1, CA
Cundy v Lindsay (1878) 3 App Cas 459, HL(E)
Edmunds v Merchants' Despatch Transportation Co (1883) 135 Mass 283
Fawcett v Star Car Sales Ltd [1960] NZLR 406
Gordon v Street [1899] 2 QB 641, CA
Hardman v Booth (1863) 1 H & C 803
Hartog v Colin & Shields [1939] 3 All ER 566
Hector v Lyons (1988) 58 P &; CR 156, CA
Helby v Matthews [1895] AC 471, HL(E)
Homburg Houtimport BV v Agrosin Private Ltd [2003] UKHL 12; [2004] 1 AC 715;
[2003] 2 WLR 711; [2003] 2 All ER 785, HL(E)
Ingram v Little [1961] 1 QB 31; [1960] 3 WLR 504; [1960] 3 All ER 332, CA
Internaut Shipping GmbH v Fercometal SARL [2003] EWCA Civ 812; [2003] 2 Lloyd's
Rep 430, CA
King's Norton Metal Co Ltd v Edridge, Merrett & Co Ltd (1897) 14 TLR 98, CA
Lake v Simmons [1927] AC 487, HL(E)
Lewis v Averay [1972] 1 QB 198; [1971] 3 WLR 603; [1971] 3 All ER 907, CA
Lovesy v Palmer [1916] 2 Ch 233
Morgan Munitions Supply Co Inc v Studebaker Corpn of America (1919) 226 NY 94;
123 NE 146
Newborne v Sensolid (Great Britain) Ltd [1954] 1 QB 45; [1953] 2 WLR 596; [1953]
1 All ER 708, CA
OT Africa Line Ltd v Vickers plc [1996] 1 Lloyd's Rep 700
Phillips v Brooks Ltd [1919] 2 KB 243
Rayner (J H) (Mincing Lane) Ltd v Department of Trade and Industry [1990] 2 AC
418; [1989] 3 WLR 969; [1989] 3 All ER 523, HL(E)
Said v Butt [1920] 3 KB 497
Smith v Hughes (1871) LR 6 QB 597, DC
Whittaker v Campbell [1984] QB 318; [1983] 3 WLR 676; [1983] 3 All ER 582, DC
Young v Schuler (1883) 11 QBD 651, CA
The following additional cases were cited in argument:
Cooper, In re, Cooper v Vesey (1882) 20 Ch D 611, CA
de Leeuw, In re, Jakens v Central Advance and Discount Corpn Ltd [1922] Ch 540
Dennant v Skinner [1948] 2 KB 164; [1948] 2 All ER 29
Farquharson Bros & Co v C King & Co [1902] AC 325, HL(E)
Gallie v Lee [1969] 2 Ch 17; [1969] 2 WLR 901; [1969] 1 All ER 1062, CA
Mercantile Credit Co Ltd v Hamblin (Note) [1965] 2 QB 242; [1964] 3 WLR 798;
[1964] 3 All ER 592, CA
Phelps v McQuade (1917) 220 NY 232; 115 NE 441
Rigby (John) (Haulage) Ltd v Reliance Marine Insurance Co Ltd [1956] 2 QB 468;
[1956] 3 WLR 407; [1956] 3 All ER 1, CA
Sowler v Potter [1940] 1 KB 271; [1939] 4 All ER 478
APPEAL from the Court of Appeal
This was an appeal by the defendant, Norman Hudson, by leave of the House of Lords
(Lord Slynn of Hadley, Lord Hobhouse of Woodborough and Lord Rodger of Earlsferry)
given on 23 July 2002 from the majority *921 decision of the Court of Appeal
(Brooke and Dyson LJJ, Sedley LJ dissenting) dismissing the defendant's appeal from
the judgment of Mr D E B Grant sitting as an assistant recorder at Leicester County
Court. The assistant recorder had given judgment in favour of the claimant, Shogun
Finance Ltd, in the sum of £18,374.52 on its claim against the defendant for, inter
alia, damages for conversion.
The facts are stated in their Lordships' opinions.
Jeremy Cousins QC, Nicholas George and Jeremy Richmond for the defendant. The
principle that should govern the passing of title in transactions such as that in the
present case is that where a finance company ("A"), whether itself or through an
intermediary, enters into "face to face" negotiation with a prospective hirer of a motor
car ("B") with a view to making a hire-purchase agreement, then if A subsequently
makes such a contract with B, although B has fraudulently assumed the identity of a
genuine third party ("C"), B acquires voidable possessory title to the car ("the
voidable title principle").
Three strands of the principle are in issue: (1) whether the inter praesentes, or face
to face, principle recognised in Phillips v Brooks Ltd [1919] 2 KB 243 can ever apply
to a written agreement; (2) whether in the absence of face to face dealing between
the hirer and the finance company such dealing only with an intermediary brings the
case within the inter praesentes principle and (3) whether the error as to identity,
induced by the rogue, was such as to prevent there being an agreement in any event.
As to (1), the case is distinguishable from Hector v Lyons (1988) 58 P & CR 156
where there was a difference between the name in which the purchaser contracted
and the name by which he was known to the vendor and in which he sued: see
Goodhart, "Mistake as to Identity in the Law of Contract" (1941) 57 LQR 228, 230.
Sedley LJ's analysis of Hector v Lyons is correct. It is authority for no more than that
a party not named in a contract cannot enforce it. If the decision of the majority of
the Court of Appeal, in its application of Hector v Lyons to the facts of the present
case, is correct, a seller of goods could always pass the risk of his being defrauded by
an impostor to an innocent third party by reducing any contract of sale into writing.
The provisions of the 1974 Act would never be available to protect the purchaser.
Protection for the finance company lies in the law regarding offer and acceptance, not
in Hector v Lyons.
The defendant does not rely on the correctness of the decision of Tucker J in Sowler v
Potter [1940] 1 KB 271, which was wrongly decided. Dyson LJ's analysis of Sowler v
Potter [2002] QB 834, 849, para 34 is correct.
As to (2), Sedley LJ correctly held that the claimant, using the dealer as its agent (see
Branwhite v Worcester Works Finance Ltd [1969] 1 AC 552), contracted face to face
with the rogue. A limited company can only act through its human agents. The
dealer's agency extended to acts that were binding on the claimant, including the
communication to the rogue of the claimant's acceptance of his offer, which the
claimant clearly authorised, expected and implicitly instructed the dealer to make. The
contract was made by that communication of acceptance. The claimant clearly
perceived that there was a contract when authorising the release of the vehicle.
*922 The question whether the dealer was an agent for the purpose of the face to
face principle is closely connected with the rationale underlying the principle, namely
that the identity of the relevant contracting party is presumed to be that of the person
physically present "identified by sight and hearing": see Phillips v Brooks Ltd [1919] 2
KB 243, 247. The claimant clearly intended the acceptance to be addressed to the
person who had been physically present with the dealer, because it was to that
person, not the real Mr Patel, that the dealer was authorised to communicate
acceptance. The claimant never sought to communicate acceptance by post or
otherwise to Mr Patel at his home address, which was known to it. There is no
authority to support the qualification of the face to face principle identified by Dyson
LJ to the effect that for it to apply there has to be face to face dealing between two
persons authorised to make a contract. If the principle were so qualified, it would
never be applicable if commercial organisations were to require, as the claimant did in
the present case, a signature to an agreement from someone present in a head office.
As to (3), mistaken identity gives rise to two distinct issues (see per Devlin LJ in his
dissenting judgment in Ingram v Little [1961] 1 QB 31, 63- 64): first, whether as a
matter of offer and acceptance the offer made is to be treated as addressed to the
rogue at all (in the present case, the rogue was not the offeree but the offeror);
secondly, whether any contract made pursuant to the relevant offer is void for
mistake. The present case should be resolved by the application of the voidable title
principle. This involves overruling Ingram v Little; alternatively, it should be
distinguished on the ground that identity was not critical for the reasons given by
Devlin LJ. Ingram v Little is out of step with English, New Zealand and United States
authority. Where goods are sold under a mistake as to the buyer's identity, following
face to face dealings, then as against third parties the contract should be voidable,
not void. This would be a just result. It is the seller who has seen and dealt with the
buyer and who has made the decision to accept his identity. This approach would
apply equally to vehicle hire-purchase cases by virtue of the provisions of the 1964
Act. Any other approach has the effect of visiting the consequences of the seller's
decision on the innocent third party. The result should not depend on whether the
rogue is the offeree or the offeror. The test of "to whom should the rogue have
considered the offer to be made? " (see per Dyson LJ [2002] QB 834, 852, para 40
and Ingram v Little [1961] 1 QB 31, at pp 53 (Sellers LJ) and 55-56 (Pearce LJ) is
inappropriate.
The voidable title principle is supported by New Zealand and United States authority,
the recommendations of the Law Reform Committee's Twelfth Report, Transfer of Title
to Chattels (1966) (Cmnd 2958), para 15, p 8, the commentary in Anson's Law of
Contract, 28th ed (2002), p 332, and Corbin on Contracts (1960 edition, but still
current), vol 3, section 602, p 620. It is also consistent with the main lines of English
and Commonwealth authority (except for Ingram v Little) and the Uniform
Commercial Code, 14th ed (1995). Apart from New Zealand, there appears to be no
Commonwealth authority on the point. Article 2-403(1)(a) of the Uniform Commercial
Code reflects the position in the decided United States cases: see Phelps v McQuade
(1917) 115 NE 441 and Edmunds v Merchants' Despatch Transportation Co (1883)
135 Mass 283; see also the commentaries in Farnsworth on Contracts, 2nd ed (1998),
p 447 and Corbin on Contracts, vol 3, para 602, pp 619-620; In re de Leeuw, Jakens
v CentralAdvance and Discount Corpn Ltd [1922] 2 Ch 540 *923 and In re Cooper,
Cooper v Vesey (1882) 20 Ch D 611. The cases mentioned are merely a reflection of a
common sense proposition that an estate owner may not be divested of his property,
or find it charged, as a result of the forgery of a third party.
For the purposes of the present appeal it is not necessary to address the wider
question raised in the Law Reform Committee's Report, and by the Uniform
Commercial Code, as to whether any mistake as to identity, whether following face to
face dealings or otherwise, should give rise to a voidable as opposed to a void
contract. Such an approach would not be consistent with Cunday v Lindsay (1878) 3
App Cas 459.
If the House of Lords were to accept the application of the voidable title principle
"across the board", it would be necessary to overrule Hardman v Booth (1863) 1 H &
C 803, which could, however, be distinguished on the ground that it was concerned
with a supposed contract made with a rogue posing as the agent of a principal. There
was no intention to contract with the agent personally, and his lack of authority
prevented there being a contract with the firm. There was therefore no contract.
Hardman v Booth 1 H & C 803 is inconsistent with the modern authorities. It produces
an unfair result. [Reference was also made to Boulton v Jones (1857) 27 LJ Ex 117.]
Devlin LJ in Ingram v Little [1961] 1 QB 31, 73 was correct when he said that Lake v
Simmons [1927] AC 487 had turned on the construction of the policy and that the
only view for which there had been a majority was that the woman was not a
customer. The test identified by the majority in Ingram v Little was wrong for the
reasons given by Megaw LJ in Lewis v Averay [1972] 1 QB 198, 208h: the
interpretation of a promise ought not to depend on how a rogue should interpret it
when he knows that he is a rogue and that the other party does not know that. As to
Lord Denning MR's formulation, at p 207d-e, he was contemplating a situation of face
to face dealing. He was not seeking to extend the proposition beyond that, though he
may have expressed it more widely in the preceding paragraph, at b-c. [Reference
was also made to Fawcett v Star Car Sales Ltd [1960] NZLR 406.]
As to Cundy v Lindsay 3 App Cas 459, the claimant in this case was not mistaken
about identity, only about whether the contract would be performed. Devlin LJ was
right in Ingram v Little [1961] 1 QB 31, 64 to say that Cundy v Lindsay was
concerned with offer and acceptance, not mistake; see also at p 65. For a contract to
be void ab initio either there must be a lack of correspondence between offer and
acceptance or the contract must truly be one where identity is an essential object. It
is not identity but security that is at the heart of all the cases (Cundy v Lindsay,
Ingram v Little, etc). The claimant's object here was not to let to Mr Patel but to let to
somebody financially sound. If Phillips v Brooks Ltd [1919] 2 KB 243 is good law, the
mere adoption of an alias will not cause a contract to be voided. King's Norton Metal
Co Ltd v Edridge, Merrett & Co Ltd (1897) 14 TLR 98 was therefore correctly decided.
Phillips v Brooks Ltd was not disapproved in Lake v Simmons [1927] AC 487. How
payment is to be made is part of a contract. What the seller is concerned to do is to
establish coincidence of identity between the person present and the person he claims
to be. He then takes a risk, being aware that there may not be that *924
correspondence. Ultimately, the problem is who runs the risk. Where there has been
face to face dealing and a chance for the vendor to establish the purchaser's identity,
especially where the vendor or finance company appreciates the risk, it should be put
on the vendor or the finance company, not on the third party. [Reference was also
made to Anson's Law of Contract, 28th ed (2002), p 332; Gordon v Street [1899] 2
QB 641 and Said v Butt [1920] 3 KB 497.]
A G Bompas QC and Sunil Iyer for the claimant. The single issue before the House is
whether or not the fraudster. When selling the vehicle to the defendant, can be shown
to have been a "debtor" under a "hire-purchase agreement" with the claimant within
the 1964 Act, which is a question of interpretation. A simple contract of bailment is
not sufficient. The fraudster was not a "debtor". This follows from the application of
settled principles of contract law, correctly applied by the judge and the majority of
the Court of Appeal. The contrary result contended for by Sedley LJ would require a
change in the law that should only be made, if at all, by Act of Parliament.
The written instrument ("the document") expressed to be made between, and signed
by, the claimant as creditor and Durlabh Patel as customer cannot qualify as the
necessary hire-purchase agreement for two reasons. First, it was not a contract at all,
let alone a hire-purchase agreement, being a forgery in that the signature of Mr Patel
was forged by the fraudster. The effect of that is that the document is a nullity as
against the claimant: see Cundy v Lindsay 3 App Cas 459, 465; In re de Leeuw
[1922] 2 Ch 540, 553 and Gallie v Lee [1969] 2 Ch 17, 30. Secondly, in so far as it
could have been a contract, it was not a contract with the fraudster; it was a contract
with a Mr Patel having the personal characteristics detailed in the document.
The defendant, while acknowledging some of the difficulties, contends for a conclusion
that the document did constitute the necessary hire-purchase agreement by seeking
to equate it with a simple contract of sale of a chattel made orally between two
individuals negotiating face to face under which title to the chattel is passed from one
to the other. It is not necessary in the present case for the law relating to the
formation of such contracts of sale, and the passing of title thereunder, to be
reviewed by the House of Lords: that law is not applicable to written contracts in
general and certainly not to the type of contract in issue here. Relevant to this
distinction is that in the case of the sale of goods contract to which the "face to face"
principle has been applied the essence of the contract is the passing of title, mode of
payment and delivery being subordinate, while in the case of a hire-purchase
contract, which is a credit bailment without title passing, the mode of payment and
delivery are crucial.
The defendant is wrong in suggesting that the Law Reform Committee in its Twelfth
Report, Transfer of Title to Chattels (Cmnd 2958) recommended a change in the law
that would be consistent with the change contended for by him. Although it pointed
out certain anomalies in hire-purchase cases, see its comment in paragraph 28, p 12.
It could not have thought that the recommendation in paragraph 15 would have
covered the point. Further, the present provisions of the 1964 Act are in effect the
product of the Consumer Credit Act 1974, which replaced the earlier provisions
wholesale but made little change of substance. It must be supposed that Parliament
did not think it necessary to change the law, yet the change in the law that the *925
defendant invites the House of Lords to make would be aimed specifically at those
provisions of the 1964 Act and be legislating for the case of motor vehicles and not
other chattels that might be dealt in by finance companies. Indeed, if there is a
discernible legislative policy it seems to be that the "nemo dat" rule is the basic rule
subject only to specific exceptions. In line with this policy, the exception for sales in
market overt in section 22 of the Sale of Goods Act 1979 was abolished by the Sale of
Goods (Amendment) Act 1994.
Sedley LJ was wrong to approach the case as he did in paragraphs 12 and 23 of his
judgment [2002] QB 834, 842-843, 847. There was no evidence as to the prevalence
or otherwise of the fraud practised in the present case. In any event, Sedley LJ should
have borne in mind the guidance given by Lord Cairns LC in Cundy v Lindsay 3 App
Cas 459, 463, referred to with approval by Lord Macnaghten in Farquharson Bros &
Co v C King & Co [1902] AC 325, 337. Sedley LJ's view of the facts, in commenting in
paragraph 12 of his judgment that the claimant had had a "cavalier approach" when
checking on the creditworthiness of Mr Patel and that they could afford to take that
approach "only because, if the buyer was in fact a rogue who was simply going to sell
the car on, [it] could count with reasonable confidence on being able to repossess it",
was not justified. There was no evidence to support the view that the claimant had
had the alleged "cavalier approach". Mr Patel's character was crucial: if he had proved
to be a rogue, selling the vehicle on, the claimant could have had no confidence about
being able to repossess the vehicle: a purchaser (not being a trade or finance
purchaser) who had taken in good faith from Mr Patel without actual notice of the
relevant agreement would have acquired good title: compare section 29(3) of the
1964 Act. For that reason, too, the identity of the customer was crucial, and it was
not open to Sedley LJ to reject the unchallenged evidence of the claimant on the
point. Only by being sure that the contracting party was Mr Patel could the claimant
have been sure that its credit checks were effective. The allegedly cavalier attitude of
the claimant needs to be weighed against the admittedly careless attitude of the
defendant.
An important weakness in Sedley LJ's judgment was that he equated the making of
the document with the making of an oral contract (or putative contract) between two
parties dealing face to face in the sale of a chattel. On that basis he sought to apply
to the document a principle ("the face to face principle") concerning unilateral mistake
in contract formation. This principle has evolved, as regards oral sale contracts, since
Phillips v Brooks Ltd [1919] 2 KB 243, but has no application in the case of a written
contract. In such a case the only question is of identification of the named parties:
see Hector v Lyons 58 P & CR 156, which is precisely on all fours with the present
case in that the defendant has to propound a contract between the fraudster and the
claimant when the fraudster is not named in the document as a contracting party.
Hector v Lyons was not decided on the ground that the contract was voidable through
fraud; indeed, the vendor thought that she was contracting with Mr Hector senior, the
person in the position of the fraudster in the present case. It was decided on the basis
that he was not party to any contract with the vendor. [Reference was also made to
Halsbury's Laws of England, vol 2 (1991), pp 830-832, para 18001 *926 and n9;
Chitty on Contracts, 28th ed (1999), vol 1, para 12-120, pp 637-638 and Young v
Schuler (1883) 11 QBD 651, 654 (Brett MR).]
The defendant's formulation of the face to face principle appears to be derived from
the remarks of Lord Denning MR in Lewis v Averay [1972] 1 QB 198, 207. However,
the principle, when applicable, is not that. Further, besides having no application in
the case of a contract in writing, it could not apply in the present case for the
following further reasons. First, it has never had, and could not have, application
outside the area of simple sales of goods. Notably, the question in the present case is
not whether property in the vehicle passed to the fraudster when he was allowed to
take it away. There is no suggestion that he ever had any title to it. Secondly, the
dealing here was not face to face at all. The face to face principle is "no more than an
aid to determining the issue which arises where a contract has apparently been made
orally by parties face to face: to whom should the offeree reasonably have interpreted
the offer as having been made?": per Dyson LJ [2002] QB 834, 852, para 40. It is a
presumption, rebuttable on the facts, that "even though there is a fraudulent
impersonation by the buyer representing himself as different man than he is" (per
Lord Denning MR in Lewis v Averay [1972] QB 198, 207) it is to the very person
before the offeror that the offer to sell was made.
Of the English cases in which the face to face principle has been directly in issue only
two have held that a contract, albeit voidable, had been brought into being: Phillips v
Brooks Ltd [1919] 2 KB 243 (which was explained by Viscount Haldane in Lake v
Simmons [1927] AC 487, 501-502) and Lewis v Averay. Both concerned oral
agreements. In each the putative agreement was a sale agreement. In each the issue
was whether the property in the goods had passed to the fraudster when he was
allowed to take them away. The present case is quite different. It is common ground
that no property in the vehicle ever passed to the fraudster. The question is whether,
when he sold the vehicle to the defendant, there was a relevant contract, specifically
a hire-purchase agreement, in existence between him and the claimant. This question
can only be answered in the affirmative if it is found that the fraudster, although not
named as a party, was a party to a contract consisting of the document. (There has
never been any attempt by the defendant to propound any other contract between
the fraudster and the claimant.) So to find would involve departing from Cundy v
Lindsay 3 App Cas 459.
Although the fraudster dealt with the motor dealer's representative face to face that
individual was not the claimant's agent (see Branwhite v Worcester Works Finance Ltd
[1969] 1 AC 552) but an "intermediary" or go-between. In that capacity he plainly
passed on to the claimant information provided by the fraudster and faxed a copy of
the driving licence provided by the fraudster, but that function was little different from
that of the post office in Cundy v Lindsay, Boulton v Jones 2 H & N 564 and Hardman
v Booth 1 H & C 803. The dealer was certainly not the claimant's agent for the
purpose of making an agreement: see Mercantile Credit Co Ltd v Hamblin (Note)
[1965] 2 QB 242. Any contract on the terms of the document came into being, if at
all, when the document was signed by the claimant. The case accordingly does not
come within the face to face principle.
*927 Supposing the principle to have been applicable, the presumption that the
claimant's offer of a hire-purchase contract was to the person in the presence of the
motor dealer's representative and not to Mr Patel was rebutted by the evidence
accepted by the trial judge, for the reasons given by Dyson LJ [2002] QB 834, 853854, paras 45-46: see Ingram v Little [1961] 1 QB 31 and Lake v Simmons [1927] AC
487. (Devlin LJ's explanation of Lake v Simmons in Ingram v Little was wrong: see C
K Allen, "Mistaken Identity " (1928) 44 LQR 72 and John Rigby (Haulage) Ltd v
Reliance Marine Insurance Co Ltd [1956] 2 QB 468, 487-489.) The importance of Mr
Patel's identity was objectively demonstrated by the care with which he was identified
in the document and the steps that the claimant had taken in its checking of him as
its contracting party and supported by the unchallenged evidence of the claimant's
sales support manager. In the circumstances. even if the face to face presumption
applies it is rebutted on the evidence. The defendant asserts that the claimant did not
write to Mr Patel to communicate acceptance to him at home and that there is no
suggestion that the claimant ever sought to communicate acceptance by post or
otherwise to Mr Patel at his home address. In fact, there is no evidence either way on
the point. Specifically, in so far as the point may be relevant to the question whether
there was a contract between the claimant and the fraudster it would be for the
defendant to show that the claimant did not seek to communicate with Mr Patel at his
home.
The "voidable title principal" has only limited support in English cases, and then only
in cases of contracts for the sale of goods made by principals face to face. The United
States authorities relied upon by the defendant are similarly limited. [Reference was
made to Lewis v Averay [1972] 1 QB 198, 207d; Corbin on Contracts, 1960 ed, ss.
601, pp 613-614, 602, pp 618-619; Phelps v McQuade 115 NE 441; Morgan Munitions
Supply Co Inc v Studebaker Corpn of America (1919) 123 NE 146; Gordon v Street
[1899] 2 QB 641 and Said v Butt [1920] 3 KB 497.]
Cousins QC in reply. As to agency, Sedley LJ [2002] QB 834, 844, para 16 was
entitled to reach the conclusion that an agency to do a particular part can be an
agency on behalf of both the customer and the finance company: see Mercantile
Credit Co Ltd v Hamblin (Note) [1965] 2 QB 242, approved in Branwhite v Worcester
Works Finance Ltd [1969] 1 AC 552.
In Lake v Simmons [1927] AC 487 there was no contract with Esme Ellison because
there was no intention that she should purchase the articles herself. "Nothing to
avoid" (per Viscount Sumner, at p 505) should be understood in that sense.
[Reference was also made to Morgan Munitions Supply Co Inc v Studebaker Corpn of
America (1919) 123 NE 146 and Ingram v Little [1961] 1 QB 31, 67.]
[By letter of 2 October 2003, counsel were informed that their Lordships invited
written submissions on the point "whether the presumption regarding ' face to face'
dealings should apply equally to dealings by correspondence and, if so, whether the
House should depart from its decision in Cundy v Lindsay 3 App Cas 459".]
Cousins QC . The "face to face principle" assists at the offer and acceptance stage of
analysis of a transaction in identifying the person to whom the words of contract were
addressed (paraphrasing the words of *928 Devlin LJ in Ingram v Little [1961] 1 QB
31, 66). It is merely a tool to serve that end. The limits of the principle have never
been precisely defined. It is sufficiently flexible to be adapted so that it can and
should be applied wherever it becomes necessary to identify the person to whom the
words of contract are actually being addressed. In cases where there has been an
actual physical presence of the rogue "B" impersonating "C" (a genuine third party),
in the company of the vendor/finance company "A", the position is straightforward;
the principle applies: see Phillips v Brooks Ltd [1919] 2 KB 243; Dennant v Skinner
[1948] 2 KB 164; Lewis v Averay [1972] 1 QB 198 and the United States cases.
Where the transaction is not so straightforward, that is no reason to disapply the
principle and achieve an artificial or unsatisfactory conclusion as to the identity of the
person to whom the words of contract were addressed. The principle should,
therefore, apply at the very least where at some stage in the transaction there has
been a "physical presence" of B and the circumstances, objectively analysed, show
that the words of contract were directed at B. Thus if in Phillips v Brooks Ltd the
rogue had departed from the jeweller's shop without reaching agreement and then
had corresponded with the jeweller, by letter or perhaps by telephone, concluding
thereby an agreement, the same conclusion should have been reached: the contract
was with the rogue. Precisely the same analysis would apply in all the situations
arising in the cases already mentioned. The fact of the physical presence merely
serves to assist in the process of identifying the party to whom the words of contract
were addressed.
As to "physical presence", it is again necessary to be flexible. In the modern age,
unlike in the days when Cundy v Lindsay 3 App Cas 459 was decided, there are many
methods of achieving "virtual" physical presence: video conferencing, video
telephone, or even the simple telephone. The principle ought not to be limited to
exclude transactions arising from such means of communication. Transactions are
also often concluded in a much more complex commercial environment than was the
case when Cundy v Lindsay was decided, and business is often conducted through
intermediaries, whether agents or not. However, an actual physical presence, even if
"virtual", still serves the same critical purpose as it did in the days of Phillips v Brooks
Ltd of identifying the person to whom the words of contract were addressed.
If the preceding reasoning is applied to the present case, the fact that the contract
might have been concluded on paper following an actual physical presence with a
mere intermediary (if the defendant's agency submissions are rejected) would be
immaterial. Looking objectively at the course of dealing as a whole, the claimant's
words of contract were directed to the rogue. It would not be necessary to depart
from Cundy v Lindsay 3 App Cas 459 to dispose of this case in the defendant's favour.
In Cundy v Lindsay the rogue had never at any stage been in the physical presence of
Lindsay & Co, or any intermediary, or any other person playing any part in the
transaction. Physical presence, therefore, could not assist in the identification of the
addressee of the words of contract.
It is, perhaps, possible to explain the decision on the basis that it was a case of
interception by a rogue of a contractual communication addressed to Lindsay & Co.
Clearly, a rogue ought not to be able to take advantage of an illegal interception of
such a communication. Lindsay & Co did, however, *929 address the words of
contract to the rogue. The correspondence was with the person who had written to
Lindsay & Co and sent to that person's address. Unless Cundy v Lindsay can be read
as a case of interception it is necessary to depart from it if the law is to be
rationalised by introducing an all-purpose test, namely, "objectively considering the
circumstances of the transaction as a whole, to whom were the words of contract
addressed?". This test, rather than any subjectively based test, based on intentions of
one party, should be adopted. Although not necessary for the present case, to depart
from Cundy v Lindsay would enable English law to give effect to the recommendations
of the Twelfth Report of the Law Reform Committee Transfer of Title to Chattels
(Cmnd 2958) in respects material to the present case. Such departure would be
consistent with the approach adopted in the Uniform Commercial Code.
Bompas QC . The so-called "face to face" principle should not be extended to dealings
by correspondence. Cundy v Lindsay 3 App Cas 459 should not be departed from. No
change in the existing law relating to this principle is warranted.
The principle recognises a rebuttable presumption that each party intended to deal
with the person who was physically in front of him rather than with the identity
proffered by that person. The term "face to face" is misleading. In fact, in every case
where the presumption has been applied, including Ingram v Little [1961] 1 QB 31,
where it was rebutted on the facts, not only have the dealings been face to face but
the contract has been verbal. This is inevitable, since where a contract is in writing
the identity of each party is to be found in the contract: see Hector v Lyons 58 P & CR
156.
The apparent reason for the principle is that parties who deal face to face have the
opportunity to evaluate one another and are likely to be influenced not by the alleged
identity of the other but by his physical characteristics, e g, his appearance and his
manner of talking. That does not apply where parties deal with each other by way of
correspondence. An extension of the face to face principle to such cases might result
in simple mail order contracts becoming more complex and expensive to administer,
since vendors would no longer be entitled to assume that if they received an order
purporting to be from A then they were dealing with A. Such extension would
encompass all such contracts, whatever the monetary value of the goods being sold
and whatever the respective sizes of the vendor and buyer. It would thus be likely to
contaminate many hundreds of thousands of transactions with uncertainty as to
whether the presumption was rebutted on the facts. The rule in Cundy v Lindsay 3
App Cas 459 offers clarity. Dealings by correspondence should be treated in the same
way as written contracts, with the names of the parties being found in the written
contract or the letters of offer and acceptance. An individual's identity has assumed
greater significance in recent years as society has become busier, less commerce is
conducted face to face and more information is publicly available about a person. It
simply cannot be said that the identity of a person who enters into a contract through
written correspondence is a matter of indifference to the other party.
A flexible interpretation of the rule such as the defendant seeks is not possible. The
House of Lords does not need to consider the situations where the parties deal with
each other by video conference (where they would see *930 and hear each other),
by telephone (where they would hear each other) or by internet "chat" (where they
would neither see nor hear each other and where, as recent criminal cases have
highlighted, the parties could never know whether the person with whom they were
"chatting" was who he claimed to be), since none of these scenarios is relevant to the
facts of this case. They are matters for Parliament to consider.
Nor should the House of Lords find that the existence of the dealer who transmitted
the documents from the rogue to the claimant made this a face to face dealing. The
dealer, who was not the claimant's agent, was nothing more than a conduit for the
rogue, performing the role of the post office in Cundy v Lindsay 3 App Cas 459, and
did not make this a face to face dealing any nore than a motorcycle courier delivering
the documents to the claimant would have done. Cundy v Lindsay was not a case of
interception of mail, and there is no reason to depart from it.
Cousins QC in reply. There is no reason in principle for limiting the application of the
face to face principle to cases of oral contracts. The terms of the decisions do not so
suggest. In so far as Hector v Lyons 58 P & CR 156 decided that the true identity of
one contracting party cannot be proved by extrinsic evidence it should be overruled;
as between the contracting parties, and before the rights of a third party intervene, a
party defrauded can always avoid for fraud, as in Gordon v Street [1899] 2 QB 641.
To confine the application of the face to face principle to cases of oral contracts would
exclude the case of a transaction where the contract was written and signed in the
presence of both contracting parties following oral negotiation between those parties
and/or their duly authorised representatives.
The complexities suggested by the claimant as resulting from an extension of the
application of the face to face principle or from the overruling of Cundy v Lindsay 3
App Cas 459 are more imagined than real. If any problems are created for those who
grant credit, the remedy is in their own hands. They can and should carry out more
careful checks to establish the identity of those with whom they deal. The acceptance
of risk is inherent in the business. By denying the validity of the transaction in the
present case, and others like it, the law would allow those in the business of providing
credit to pass the risk of their bad decisions as to the persons with whom they should
deal to innocent third parties such as the defendant.
Their Lordships took time for consideration. 19 November.
LORD NICHOLLS OF BIRKENHEAD
1 My Lords, this appeal raises a difficult problem about the effect of fraudulent
misrepresentation on the formation of a contract. If a crook (C) fraudulently
represents to the owner of goods (O) that he is another identifiable person (X) and on
that basis O parts with goods to C by way of sale, is there in law a contract between O
and C? Does the answer to this question differ according to whether O and C
communicated face-to-face, or by correspondence, or over the telephone, or by email? The law on cases involving this type of fraudulent conduct, euphemistically
described as cases of "mistaken identity", is notoriously unsatisfactory. The reported
decisions are few in number and they are not reconcilable. In the present case *931
Sedley LJ said the law has tied itself into a Gordian knot. Brooke LJ said the law is in a
"sorry condition" which only Parliament or your Lordships' House can remedy: see
[2002] QB 834, 847, 855, paras 23, 51.
2 Two features are usually present when cases of this type come before the court.
The first feature is that a seller of goods is concerned with the creditworthiness of the
proposed buyer. The seller wants to be sure he will be paid for the goods he is
handing over. Here the common law seems to have drawn a distinction between two
kinds of fraudulent misrepresentation. The common law distinguished between a case
(1) where a crook fraudulently asserts he is creditworthy and a case (2) where a
crook fraudulently asserts he is someone else known to be creditworthy. One might
suppose there is no difference of substance between these two cases. These are
merely two ways a crook may assert a spurious creditworthiness. But, historically, the
law seems to have been otherwise. In case (1), when the seller parts with his goods
he does so pursuant to a voidable contract. This is said to be a case of mistake as to a
person's attributes. In case (2), in some circumstances but not all, the seller has been
held to part with his goods pursuant to a void contract, that is, no contract at all. This
is said to be a case of mistake as to a person's identity.
3 The second feature usually present in cases of this type is that the crook then sells
the goods to an innocent third party. This feature explains why the distinction
between a voidable and a void contract matters. Having fraudulently acquired the
goods from their owner, the crook then sells them to an unsuspecting third party. The
rights of this innocent third party may depend upon the nice distinction between a
voidable contract and a void contract. In case (1), where the crook fraudulently
misrepresents his own financial standing, the loss falls on the unfortunate owner of
the goods who was tricked into parting with them to the crook. King's Norton Metal Co
Ltd v Edridge, Merrett & Co Ltd (1897) 14 TLR 98 is an instance of this. There the
crook ordered some brass rivet wire from a metal manufacturer. On his writing paper
he represented he was in business in a big way, running a large factory and having
several depots and agencies. The manufacturer, King's Norton, supplied the goods
sought but was not paid. King's Norton was unable to recover the goods or their value
from the third party to whom the crook subsequently sold them.
4 This outcome is to be contrasted with case (2), where the crook asserts he is
someone else. In such a case the loss sometimes, but not always, falls upon the
unfortunate third party who also was a victim of the crook's trickery. The third party
paid for the goods in all honesty, but he must return them to their original owner or
pay their value. Thus in Cundy v Lindsay (1878) 3 App Cas 459 Cundy had to pay the
linen manufacturers Lindsay & Co for the 250 dozen cambric handkerchiefs the crook
acquired from Lindsay by fraudulently representing he was the respectable business
firm of Blenkiron.
5 The distinction in outcome thus drawn between these two kinds of fraudulent
misrepresentation, one as to "attributes" and the other as to "identity", is
unconvincing. It has been described as a reproach to the law. To a considerable
extent the distinction has now been eroded. Cundy v Lindsay 3 App Cas 459 was
decided over a century ago, and since then there have been significant developments
in this area of case law. Unfortunately these developments have left the law in a state
of disarray. The question *932 before the House on this appeal is whether this
distinction, so far as it remains, should still be regarded as good law.
Fraudulent misrepresentation and intention
6 The question before the House calls first for some analysis of the effect of
fraudulent misrepresentation on a person's intention to enter into a contract. A
contract of sale and purchase, like any other contract, requires agreement, a meeting
of minds. The seller must intend, or appear to intend, to sell the goods, and the buyer
must intend, or appear to intend, to buy the goods on the agreed terms. The
presence of fraud does not negative the existence of such an intention on the part of
either party. Fraud does not negative intention. A person's intention is a state of
mind. Fraud does not negative a state of mind. The existence of a fraudulent
misrepresentation means that a person's intention is formed on a false basis--a basis,
moreover, known by the other party to be false. The effect of fraud is to negative
legal rights or obligations otherwise flowing from an intention to enter into a contract.
Fraud enables the victim of the fraud to decline to proceed with a contract into which,
by reason of the fraudulent misrepresentation, he was induced to enter, and he has a
claim for damages for any loss he may suffer. But fraud does not have the
consequence of negativing the formation of a contract.
7 Similarly with consent: as noted by Robert Goff LJ in Whittaker v Campbell [1984]
QB 318, 327, in this context fraud does not "vitiate" consent. Professor Glanville
Williams rightly said that the maxim "fraud vitiates consent" is thoroughly misleading:
see "Mistake As To Party in the Law of Contract" (1945) 23 Canadian Bar Review 271,
291-292. Whether a person has consented to this or that is a question of fact. Fraud
does not negative a fact. As with intention, so with consent, fraud negatives legal
rights or obligations otherwise flowing from a person having given his consent to a
particular happening. Fraud can destroy legal rights; it cannot destroy facts.
8 This distinction, between negativing intention or consent and negativing the rights
otherwise flowing from intention or consent, is important. It explains why the law
treats a contract induced by fraud as voidable, not void. The necessary coincidence of
intention, or consensus ad idem, may exist even where the intention and consent of
the victim were induced by fraud. An intention thus induced is regarded by the law as
sufficient to found a contract, even though the victim may repudiate the contract as
soon as he discovers the fraud.
9 Thus, if a person is induced to buy goods by a fraudulent misrepresentation that the
goods are sound, in law a contract to buy the goods is created even though the goods
are different from the goods the buyer intends to buy and even though the other
party knows this. The fact that the goods are different in quality from the goods
which, as the crook knows, the victim wishes to buy is not regarded by the law as
meaning that no contract was made.
10 This approach is not confined to cases of differences of quality. The law adopts the
same approach where the goods offered for sale are fraudulently misrepresented to
be a unique item such as the original of a specific painting by a named artist or the
football shirt worn by Bobby *933 Moore in the 1966 World Cup final match. The
buyer wishes ("intends") to buy the particular original painting or the particular shirt
and nothing else. The seller knows this. But the effect of the misrepresentation is that
the buyer, believing the proffered goods to be as represented, agrees to buy the
proffered goods. He enters into a contract on the basis of what he believes is the
position. In law he contracts to buy the proffered goods even though, looking more
broadly at his state of mind, he had no intention of buying anything other than the
original of the particular painting or the particular football shirt. If intention is
considered in this broad sense, there is no "meeting of minds " whenever one party is
persuaded by the other to enter into a contract by a material fraudulent
misrepresentation made by the other. But for the purpose of deciding whether a
person had the necessary intention to enter into a contract with the crook, a person's
intention is considered more narrowly. It is assessed by reference to what he believed
the position to be. The fact that his belief was induced by the other's fraudulent
misrepresentation entitles him to repudiate the contract. His belief means there was a
contract, but the fraudulent inducement of his belief means the contract is voidable.
11 The position is similar if the owner of goods agrees to sell them to a prospective
buyer on the basis of a fraudulent assertion of his financial reliability. The buyer's
fraudulent statement about himself does not negative the seller's intention to sell the
goods to the crook on the agreed terms. Nor does it negative the fact that, when the
crook acquired the goods from the seller, he did so with the seller's consent. The
fraud means only that the seller's contractual intention was formed, and his consent
to hand over the goods obtained, on a fraud-induced basis. There is a contract, but it
may be avoided on discovery of the fraud.
Fraudulent misrepresentation and identity
12 Fraudulent misrepresentations about a person's identity have to be considered
against this background of legal principle. The factual postulate now under
consideration, as mentioned at the outset, is that a crook (C) fraudulently
misrepresents to the owner of goods (O) that he, C, is another identifiable person (X)
whom O believes to be creditworthy. In reliance on this representation O agrees to
sell the goods and he hands them over to C. Is this pursuant to a voidable contract
between O and C? Or is there no contract between them at all? As between O and C
the answer is of no moment. Either way O has ample remedies against C, assuming C
has some money and can be traced. As already noted, however, the answer to these
question may be of crucial importance to a third party who subsequently bought the
goods in good faith from C.
13 In cases of this type there are two innocent parties, O and the third party
purchaser. Striking the right balance when one of two innocent parties must sustain a
loss is seldom easy. In 1960 Devlin LJ suggested that in this type of case the loss
should be divided between O and the third party in such proportion as is just in all the
circumstances: see Ingram v Little [1961] 1 QB 31, 73-74. Lord Gardiner LC then
referred this problem to the Law Reform Committee. In its Twelfth Report, on the
Transfer of Title to Chattels (1966) (Cmnd 2958) the committee rejected Devlin LJ's
apportionment suggestion as impracticable. The committee recommended that where
goods are sold *934 under a mistake as to the buyer's identity the contract should,
so far as third parties are concerned, be voidable and not void: paragraphs 9-12 and
15.
14 Parliament did not implement this recommendation. Instead the Sale of Goods Act
1979 re-enacted the relevant law in much the same terms as the Sale of Goods Act
1893 (56 & 57 Vict c 71). In general, proprietary rights of an owner of goods endure
against a third party who buys them in good faith from a thief. That is the effect of
section 21(1). But there are statutory exceptions in some cases where the owner of
goods parted with his goods consensually. The third party may acquire a good title if
C, who purported to sell the goods to him, had a voidable title: section 23. Or if C had
agreed to buy the goods from O and was in possession of the goods with O's consent:
section 25. Additionally, section 27 of the Hire-Purchase Act 1964 made a limited
exception for the protection of purchasers of motor vehicles. Section 27 of the 1964
Act, as substituted by the Consumer Credit Act 1974 (section 192(3)(a) and Schedule
4, paragraph 22), provides:
"(1) This section applies where a motor vehicle has been bailed ... under a hirepurchase agreement, or has been agreed to be sold under a conditional sale
agreement, and, before the property in the vehicle has become vested in the debtor,
he disposes of the vehicle to another person.
"(2) Where the disposition referred to in subsection (1) above is to a private
purchaser, and he is a purchaser of the motor vehicle in good faith without notice of
the hire-purchase or conditional sale agreement ... that disposition shall have effect
as if the creditor's title to the vehicle has been vested in the debtor immediately
before that disposition."
"Creditor" means the person by whom goods are bailed under a hire-purchase
agreement, and "debtor" means the person to whom a motor vehicle is bailed under
such an agreement: section 29(1)(4), as substituted.
The proceedings
15 The present case concerns this latter exception. The crucial issue is whether
Norman Hudson, who bought a Mitsubishi Shogun SWB motor car from a crook who
promptly disappeared, can bring himself within section 27 of the 1964 Act. Mr Hudson
was a private purchaser who bought the vehicle in good faith. His right to retain this
vehicle depends upon whether he can establish that the crook acquired possession of
the vehicle under the written hire-purchase agreement which on its face was made
between the finance company, Shogun Finance Ltd, and a Mr Durlabh Patel. When
signing this agreement the crook pretended to be Mr Durlabh Patel, living at an
address in Leicester. As proof of his identity the crook produced Mr Patel's driving
licence which he had obtained improperly. The finance company checked Mr Patel's
credit rating. Finding this to be satisfactory the finance company instructed the motor
dealer who had been dealing with the crook to let the crook have the car. Mr Patel
knew nothing about any of these goings on.
16 If Mr Hudson is to bring himself within section 27 of the 1964 Act he must
establish that possession of the car obtained by the crook in this way was under a
hire-purchase agreement made between him, the crook, and Shogun Finance. There
is of course no question of an agreement between Mr Patel and Shogun Finance. At
the trial the judge, Mr D E B Grant sitting *935 as an assistant recorder at Leicester
County Court, held that Mr Hudson failed to do so. He gave judgment for Shogun
Finance in the amount of £18,374.
17 The majority of the Court of Appeal, Brooke and Dyson LJJ, agreed with the
judge's decision. Brooke LJ said the hire-purchase agreement, if made between
anyone, was made between the finance company and Mr Patel. The finance company
did not make the agreement with anyone else. Dyson LJ held that section 27 of the
Hire-Purchase Act 1964 did not avail Mr Hudson because the crook was not the hirer
named in the written hire-purchase agreement and therefore he was not the debtor
under the agreement. Sedley LJ dissented. The finance company, using the dealer as
its agent, had in law contracted face-to-face with a fraudsman in circumstances
insufficient to rebut the presumption that it was with him, and not with the person he
claimed to be, that the company was contracting.
Fraudulent misrepresentation: face-to-face dealings
18 I can now turn to the effect of a fraudulent misrepresentation made by a person
about his identity. In cases of face-to-face dealings the law, as declared by the
preponderance of authority, is tolerably clear. The owner of the goods believes the
person in front of him is X, and in that belief he contracts with the person in front of
him. The fraudulent misrepresentation by the crook C regarding his identity no more
negatives O's intention to contract with C than, in my earlier example, the seller's
misrepresentation about the identity of the proffered goods negatives the buyer's
intention to buy the proffered goods. In each case the relevant intention is to be
ascertained by looking at the position which, as a result of the misrepresentation, the
other party believes to exist. On that footing there is consensus, in the relevant
respect, between the parties. O believes C, the person in front of him, to be X and he
deals with C in that belief. The fraud entitles O to avoid the contract, but it does not
negative the formation of a contract with C.
19 Thus in Phillips v Brooks Ltd [1919] 2 KB 243 Horridge J held that the jeweller
contracted to sell the ring to the crook in the shop who represented he was Sir
George Bullough. The jeweller had heard of Sir George Bullough and checked he lived
at the address given. The jeweller gave evidence he had no intention of making any
contract with any person other than Sir George Bullough. Horridge J rightly analysed
what that meant by adopting a passage from the judgment of Morton CJ in the
Massachusetts case of Edmunds v Merchants' Despatch Transportation Co (1883) 135
Mass 283, 283-284:
"The fact that the seller was induced to sell by fraud of the buyer made the sale
voidable, not void. He could not have supposed that he was selling to any other
person; his intention was to sell to the person present, and identified by sight and
hearing; it does not defeat the sale because the buyer assumed a false name or
practised any other deceit to induce the vendor to sell." (Emphasis added.)
20 In Ingram v Little [1961] 1 QB 31, another "face-to-face" case, the majority of the
Court of Appeal reached the contrary conclusion. A crook responded to an
advertisement for a car and fraudulently introduced himself *936 as P G M
Hutchinson living at a stated address in Caterham. The owners of the car checked in
the telephone directory there was a person of that name living at that address. The
crook paid for the car with a cheque made out in his assumed name. Sellers and
Pearce LJJ held that the owners did not enter into a contract with the crook. Sellers LJ
considered the offer made by the owners of the car was capable of acceptance only by
the honest P G M Hutchinson of Caterham. Pearce LJ considered that whether a party
was not contracting with the physical person to whom he uttered the offer but with
another individual whom he believed to be the person physically present was a
question of fact.
21 Devlin LJ disagreed. He pointed out, at p 65:
"If Miss Ingram had been asked whether she intended to contract with the man in the
room or with P G M Hutchinson, the question could have no meaning for her, since
she believed them both to be one and the same. The reasonable man of the law--if he
stood in Miss Ingram's shoes--could not give any better answer."
22 Devlin LJ suggested, at p 66, that to deal with this difficulty the law should
formulate a presumption that a person is intending to contract with the person to
whom he is actually addressing the words of contract. That should be the starting
point. Devlin LJ stressed that the presumption could not be rebutted by piling up
evidence that Miss Ingram would never have contracted with the person in front of
her unless she had thought him to be P G M Hutchinson. There was everything to
show that Miss Ingram would never have accepted the crook's offer if she had known
the truth, but nothing to rebut "the ordinary presumption" that she was addressing
her acceptance, "in law as well as in fact", to the person to whom she was speaking:
p 67.
23 The majority decision in Ingram v Little [1961] 1 QB 31 was doubted when the
same problem came before a differently constituted Court of Appeal 10 years later, in
Lewis v Averay [1972] 1 QB 198. The court comprised Lord Denning MR, Phillimore
and Megaw LJJ. In the Lewis case a crook represented orally to the owner of a car
that he was a well known actor, Richard Greene. Lord Denning MR, characteristically,
enunciated a broad proposition: mistake as to identity renders an apparent contract
voidable, not void. In this type of case the third party knew nothing of what passed
between the seller and the rogue and he acted with complete circumspection and in
good faith. It was the seller who let the rogue have the goods and thus enabled him
to commit the fraud on the third party. Phillimore LJ, at p 208, considered there was
nothing to displace the prima facie presumption that the car owner was dealing with
the person present in the flat, the rogue: "this case really is on all fours with Phillips v
Brooks Ltd which has been good law for over 50 years." Megaw LJ, at p 209, based
his decision on the ground that the mistake of the owner of the car went no further
than a mistake as to the attributes of the rogue: it "was simply a mistake as to the
creditworthiness of the man who was there present and who described himself as Mr
Green".
24 Sometimes in these cases the transaction is evidenced in writing. This can make
no difference to the outcome. Clearly there is no magic attaching to a
misrepresentation made in writing rather than by word of mouth. The presence or
absence of a written record of a transaction *937 negotiated face to face, such as an
invoice or receipt made out in favour of Sir George Bullough, with or without his
address, or a cheque ostensibly signed by Sir George Bullough, is neither here nor
there for present purposes. Writings such as these are no more than stark
contemporary confirmation that the misrepresentation was made and that the seller
believed it.
25 Similarly the contractual position between O and C must be the same if they meet
face-to-face and the deal arranged by them is later embodied in a written agreement.
This further step does not relevantly change the legal position. The written contract is
expressed to be made between O and X. But C, the person with whom O was
physically dealing, asserted he was X, and O believed him. So the description of C in
the contract as X was a fraudulent misnomer. C used a false name and address, and
the written contract is to be construed accordingly.
Fraudulent misrepresentation: dealing by correspondence
26 But what of the case where a fraudulent misrepresentation is made in writing but
O and C do not meet each other? C writes to O saying he is X and the deal proceeds
on that basis. O parts with his goods to the person with whom he is in fact dealing,
namely, C, in the belief he is X.
27 At first sight it seems counter-intuitive to speak of a contract between O and C in
cases of this type. It seems counter-intuitive because on its face a contract in writing
or in correspondence expressed to be made between O and X is inconsistent, agency
apart, with its being a contract between O and C. But this intuitive response is not a
sound guide if it leaves out of account, as all too easily it may, the vitally important
underlying fraudulent misrepresentation. In his dealings with O the crook C
represented he was X, and O proceeded to deal with him (C) in that belief.
28 When this feature is kept in mind it readily becomes apparent that in principle
cases of this type are no different from cases of face-to-face dealings. The existence
of physical immediacy in one case, and the absence of it in the other, is immaterial.
The physical immediacy of C in face-to-face cases tends to emphasise O's intention to
deal with the person in front of him. With other forms of communication such as the
telephone or correspondence this physical immediacy is lacking. But in each case,
whatever the mode of communication, what matters is whether O agreed to sell his
goods to the person with whom he was dealing, not why he did so or under what
name. The latter is relevant to remedy, not to formation of a contract.
29 In this regard mention must be made of reasoning sometimes advanced here,
along the lines that the identity of the person to whom a written offer is made is a
question solely of construction of the document. The offer, it is said, is made to the
person identified in the document and no one else. A written offer made by O to X is
not capable of acceptance by C. Hence, it is said that, whatever the position in faceto-face dealings, in cases of written contracts or contracts made by correspondence
there can be no contract between O and C, contradicting as this would the terms of
the document.
30 The flaw in this reasoning is that it begs the crucial question: to whom was the
offer made? The reasoning assumes this is a straightforward case of an offer made to
the person named. Indeed the person named is X. *938 But that is only part of the
picture. O believes that X, the person to whom he is writing and to whom he
addressed the offer, is one and the same person as the person with whom he is
dealing. In fact he is not dealing with X. He is dealing with C. O's misapprehension in
this regard, induced by C's fraud, is no different in principle from a case where C's
misrepresentation is made orally in the course of the face-to-face meeting. The legal
problem is the same in both cases. The presence or absence of writing does not
constitute a principled ground of distinction.
31 Thus, when Lindsay & Co supplied linen handkerchiefs in response to a written
order they were under a misapprehension regarding the identity of the person placing
the order in the same way as the jeweller in the shop was under a misapprehension
regarding the identity of his customer ("I am Sir George Bullough") in Phillips v
Brooks Ltd [1919] 2 KB 243. If the approach adopted in Phillips v Brooks Ltd is
correct, Lindsay's misapprehension no more negatived the formation of a contract
with the person placing the written order for handkerchiefs than did the like
misapprehension by the jeweller in Phillips v Brooks Ltd. The jeweller parted with his
ring to the customer in his shop. Lindsay parted with their linen by sending it to the
address supplied by the crook. On what terms? The answer must be, on the terms
agreed between Lindsay and the person with whom they were dealing. That was a
contract Lindsay could have enforced, had they wished. Or they could have
repudicated it on the grounds of fraudulent misrepresentation.
32 In Cundy v Lindsay 3 App Cas 459 the House reached the contrary conclusion. The
reasoning of all their Lordships was to the same effect. Lord Cairns LC encapsulated
this reasoning, at p 465:
"Of [the crook Blenkarn] [Lindsay] knew nothing, and of him they never thought.
With him they never intended to deal. Their minds never, even for an instant of time
rested upon him, and as between him and them there was no consensus of mind
which could lead to any arrangement or any contract whatever."
Lord Hatherley and Lord Penzance left open what the position would be had the crook
come into personal contact with Lindsay.
The choice
33 In my view this decision is not reconcilable with Phillips v Brooks Ltd [1919] 2 KB
243 or with Lewis v Averay [1972] 1 QB 198 or with the starting point "presumption"
formulated by Devlin LJ in Ingram v Little [1961] 1 QB 31. The legal principle
applicable in these cases cannot sensibly differ according to whether the transaction is
negotiated face-to-face, or by letter, or by fax, or by e-mail, or over the telephone or
by video link or video telephone. Typically today a purchaser pays for goods with a
credit or debit card. He produces the card in person in a shop or provides details of
the card over the telephone or by e-mail or by fax. When a credit or debit card is
fraudulently misused in this way the essence of the transaction is the same in each
case. It does not differ from one means of communication to the next. The essence of
the transactionin each case is that the owner of the goods agrees to part with his
goods on the basis of a fraudulent misrepresentation made by the other regarding his
identity. Since the essence of the transaction *939 is the same in each case, the law
in its response should apply the same principle in each case, irrespective of the
precise mode of communication of offer and acceptance.
34 Accordingly, if the law of contract is to be coherent and rescued from its present
unsatisfactory and unprincipled state, the House has to make a choice: either to
uphold the approach adopted in Cundy v Lindsay and overrule the decisions in Phillips
v Brooks Ltd and Lewis v Averay, or to prefer these later decisions to Cundy v
Lindsay.
35 I consider the latter course is the right one, for a combination of reasons. It is in
line with the direction in which, under the more recent decisions, the law has now
been moving for some time. It accords better with basic principle regarding the effect
of fraud on the formation of a contract. It seems preferable as a matter of legal
policy. As between two innocent persons the loss is more appropriately borne by the
person who takes the risks inherent in parting with his goods without receiving
payment. This approach fits comfortably with the intention of Parliament in enacting
the limited statutory exceptions to the proprietary principle of nemo dat quod non
habet. Thus, by section 23 of the 1979 Act Parliament protected an innocent buyer
from a seller with a voidable title. The classic instance of a person with a voidable title
is a person who acquired the goods by fraud: see per Bramwell LJ in Babcock v
Lawson (1880) 5 QBD 284, 286. Further, this course is supported by writers of the
distinction of Sir Jack Beatson: see Anson's Law of Contract, 28th ed (2002), p 332. It
is consistent with the approach adopted elsewhere in the common law world, notably
in the United States of America in the Uniform Commercial Code, 14th ed (1995),
section 2-403. And this course makes practical sense. In a case such as the present
the owner of goods has no interest in the identity of the buyer. He is interested only
in creditworthiness. It is little short of absurd that a subsequent purchaser's rights
depend on the precise manner in which the crook seeks to persuade the owner of his
creditworthiness and permit him to take the goods away with him. This ought not to
be so. The purchaser's rights should not depend upon the precise form the crook's
misrepresentation takes.
36 Cundy v Lindsay has stood for a long time. But I see no reason to fear that
adopting this conclusion will unsettle the law of contract. In practice the problems
surrounding Cundy v Lindsay arise only when third parties' rights are in issue. To
bring the law here into line with the law already existing in "face-to-face" cases will
rid the law of an anomaly. Devlin LJ's starting point presumption is a workable
foundation which should apply in all cases. A person is presumed to intend to contract
with the person with whom he is actually dealing, whatever be the mode of
communication.
37 Although expressed by Devlin LJ as a presumption, it is not easy to think of
practical circumstances where, once in point, the presumption will be displaced. The
factual postulate necessary to bring the presumption into operation is that a person
(O) believes that the person with whom he is dealing is the person the latter has
represented himself to be. Evidence that the other's identity was of importance to O,
and evidence of the steps taken to check the other's identity, will lead nowhere if the
transaction proceeds on the basis of the underlying factual postulate. *940 The
present case
38 It follows that I would allow this appeal. The principles applicable to the formation
of a contract of sale are equally applicable to the formation of a hire-purchase
agreement. The document submitted to Shogun Finance, and signed by the crook in
the name of Mr Patel, does of course refer unequivocally to Mr Patel. The document
identifies him with some particularity: his full name and address, his date of birth, his
driving licence number, and his employer's name and address. These details were of
prime importance to Shogun Finance because they identified the person whose credit
rating it had checked and approved. The company intended to contract with this
person. But it is clear from the evidence that Shogun Finance, as much as the dealer
in the car showroom, thought this was one and the same person as the individual in
the showroom. Shogun Finance proceeded in this (fraud-induced) belief.
39 This is manifest because Shogun Finance authorised the dealer to hand over the
car to the person in the showroom, he being (as the finance company knew) the
person who had signed the agreement and he being (so the finance company
believed) the person whose credit rating it had checked. Shogun Finance believed he
was Mr Patel, in the same way as the jeweller in Phillips v Brooks Ltd believed the
customer in his shop was Sir George Bullough. In the belief that the person in the
dealer's showroom was Mr Patel, Shogun Finance intended to hire the car to that
person. That is what the finance company intended to do by the written hire-purchase
agreement, and that is what it thought it had done. Had this not been so it would not
have released the car to him. Shogun Finance was mistaken in its belief about the
identity of the person in the showroom, in the same way as the jeweller was mistaken
in his belief about the identity of the person in his shop. But that mistaken belief,
induced by the crook's fraudulent misrepresentation, did not negative the finance
company's intention to let the car on hire to the person in the showroom on the terms
set out in the hire-purchase agreement. Nor could the crook assert he had no
contractual intention: he signed the hire-purchase agreement, albeit using a false
name and address. The alternative conclusion involves the proposition that when the
dealer released the car to the crook, the dealer was guilty of converting the car and
was liable to the finance company accordingly. That would be a distorted appraisal of
the facts.
40 The finance company sought to gain assistance from Hector v Lyons (1988) 58 P &
CR 156, a decision binding upon the Court of Appeal. Suffice to say, that decision
should not be taken as authority for the proposition that if O intends to contract with
C in the belief he is X, there can be a contract between O and C if the contract is oral
but not if it is reduced into writing and expressed to be made between O and X.
Evidence of the fraudulent misrepresentation and of O's belief is admissible to identify
who are the parties to the written contract.
41 One further point may be noted. Some time was taken up in this case with
arguments on whether the dealer was an agent for the finance company and for what
purposes. This was in an endeavour to bring the case within the "face-to-face"
principle. The need for such singularly sterile arguments underlines the practical
absurdity of a principle bounded in this way. The practical reality is that in the instant
case the presence or absence of a *941 representative of the finance company in the
dealer's showroom made no difference to the course of events. Had an authorised
representative of the finance company been present no doubt he would have
inspected the driving licence himself and himself obtained the information needed by
his company. As it was, a copy of the licence, together with the necessary
information, were faxed to the finance company. I can see no sensible basis on which
these different modes of communication should affect the outcome of this case. I
would set aside the orders of the assistant recorder and the Court of Appeal, and
dismiss this action. Mr Hudson acquired a good title to the car under section 27 of the
1964 Act.
LORD HOBHOUSE OF WOODBOROUGH
42 My Lords, the question at issue on this appeal is: did Mr Hudson acquire a good
title to the car when he bought the car from the rogue (R) who himself had no title?
The basic principle is nemo dat quod non habet: see the Sale of Goods Act 1979,
section 21(1) and Helby v Matthews [1895] AC 471 where it was held that the same
rule applied to a sale by a hire-purchaser. The hire-purchaser has no title to the goods
and no power to convey any title to a third party. The title to the goods and the power
to transfer that title to any third party remains with the hire-purchase company and
with it alone. Clause 8 of the hire-purchase "agreement" and the printed words in the
form immediately below the space for the customer's signature also expressly say the
same. There are common law and statutory exceptions to this rule (e g, sales in
market overt or by a mercantile agent in possession of the goods with the consent of
the owner).
43 In the present case, the statutory exception relied on by Mr Hudson is that in Part
III of the Hire-Purchase Act 1964 as re-enacted in the Consumer Credit Act 1974:
"where a motor vehicle has been bailed ... under a hire-purchase agreement ... and,
before the property in the vehicle has become vested in the debtor, he disposes of the
vehicle to another person ... [who is] a private purchaser [who has purchased] the
motor vehicle in good faith without notice of the hire-purchase ... agreement ... that
disposition shall have effect as if the creditor's title to the vehicle has been vested in
the debtor immediately before that disposition": section 27(1) and (2). (Emphasis
supplied.)
Section 29(4) adds:
"the 'debtor' in relation to a motor vehicle which has been bailed ... under a hirepurchase agreement ... means the person who at the material time (whether the
agreement has before that time been terminated or not) ... is the person to whom the
vehicle is bailed ... under that agreement ... " (Emphasis supplied.)
44 The relevant question is therefore one of the application of this statutory provision
to the facts of this case (no more, no less). Thus the question becomes: "Was R a
debtor under the hire-purchase agreement relating to the car?" Mr Hudson contends
that R was; the finance company contends that he was not. The judge and the
majority of the Court of Appeal found that he was not; Sedley LJ would have held that
he was.
45 *942 What was the "hire-purchase" agreement relied on? It was a written
agreement on a standard hire-purchase printed form purporting to be signed as the
"customer" by one Durlabh Patel, the person who lived at 45 Mayflower Road,
Leicester, to whom driving licence no 'PATEL506018DJ9FM' had been issued and with
a date of birth 01/06/58. This was an accurate identification of the real Mr Durlabh
Patel, but in no respect of R who was not the person who lived at that address, not
the person to whom the driving licence had been issued and (one suspects) not a twin
in age of the real Mr Patel. R forged Mr Patel's signature so as to make the signature
on the hire-purchase 'agreement' appear to be the same as that on the driving
licence. The parties to the written ' agreement' are Mr Patel (the "customer"), and
Shogun Finance Ltd (the creditor). There is also an offer and acceptance clause
(clause 1):
"You [the customer named overleaf] are offering to make a legal agreement by
signing this document. We [the creditor] can reject your offer, or accept it by signing
it ourselves ... If we sign this document it will become legally binding at once (even
before we send you a signed copy) ..."
46 The effect of this is that: (i) it re-emphasises that the customer/hirer is, and is
only, the person named on the front of the document; (ii) it makes it clear that the
agreement is the written agreement contained in the written document; (iii) the offer
being accepted by the creditor is the offer contained in the document and that alone,
that is to say, the offer of Mr Durlabh Patel of the address in Leicester and to whom
the driving licence was issued; (iv) for a valid offer to be made, the form must have
been signed by Mr Durlabh Patel; and, (v) most importantly of all, the question in
issue becomes a question of the construction of this written document, not a question
of factual investigation and evaluation. I will take these points in turn but the second
and fifth are fundamental to them all and to the giving of the correct answer to this
case.
47 The first point is a matter of the construction of the written document. It admits of
only one conclusion. There is no mention in the document of anyone other than Mr
Durlabh Patel. The language used is clear and specific, both in the substance of the
identification--name and address and driving licence number and age--and in the
express words of the offer and acceptance clause-- "the customer named overleaf".
The "agreement" is a consumer credit agreement. It is unlike a mere retail sale
where, although title may, indeed, will normally have already passed to the buyer, the
seller is not obliged to part with the goods until he has been paid or is satisfied that
he will be paid. Credit is only relevant to the release of the seller's lien and to his
obligation to deliver, not to the basic transaction; the basic transaction is unaffected
and will stand. Under a contract for the sale of goods, the contract has been made
and, normally, the title to the goods has vested in the buyer before the time for
payment has arrived. (Retention of title clauses are a modern development.) By
contrast, in a consumer credit transaction, the identity of the customer is fundamental
to the whole transaction because it is essential to the checking of the credit rating of
the applicant borrower. All this precedes the making of any contract at all. No title to
the goods is obtained by the hirer at any stage. If the finance company does not
accept the proposer's offer, the proposer has *943 acquired nothing. Unlike in the
sale of goods, there is nothing--no status quo--which has to be undone. The
observations of Devlin LJ in Ingram v Little [1961] 1 QB 31, 69 are not pertinent; the
approach and dicta of Lord Denning MR in Lewis v Averay [1972] 1 QB 198 are
misplaced and wrong.
48 It has been suggested that the finance company was willing to do business with
anyone, whatever their name. But this is not correct: it was only willing to do
business with a person who had identified himself in the way required by the written
document so as to enable it to check before it enters into any contractual or other
relationship that he meets its credit requirements. Mr Durlabh Patel was such an
identified person and met its credit requirements so it was willing to do business with
him. If the applicant had been, say, Mr B Patel of Ealing or Mr G Patel of Edgbaston, it
would not have been willing to deal with them if they could not be identified or did not
meet with its credit requirements. Correctly identifying the customer making the offer
is an essential precondition of the willingness of the finance company to deal with that
person. The rogue knew, or at least confidently expected, that the finance company
would be prepared to deal with Mr Durlabh Patel but probably not with him, the
rogue; and he was, in any event, not willing himself to enter into any contract with
the finance company. This is not a case such as that categorised by Sedley LJ [2002]
QB 834, 846, para 21 as the use of a "simple alias" to disguise the purchaser rather
than to deceive the vendor--the situation which resembles that in King's Norton Metal
Co Ltd v Edridge, Merrett & Co Ltd 14 TLR 98. But, even then, in a credit agreement it
would be useless to use a pseudonym as no actual verifiable person against whom a
credit check could be run would have been disclosed and the offer would never be
accepted. Mr Durlabh Patel is the sole hirer under this written agreement. No one else
acquires any rights under it; no one else can become the bailee of the motor car or
the "debtor" "under the agreement". It is not in dispute that R was not Mr Durlabh
Patel nor that R had no authority from Mr Patel to enter into the agreement or take
possession of the motor car.
49 Mr Hudson seeks to escape from this conclusion by saying: "but the rogue was the
person who came into the dealer's office and negotiated a price with the dealer and
signed the form in the presence of the dealer who then witnessed it." The third and
fourth points address this argument. The gist of the argument is that oral evidence
may be adduced to contradict the agreement contained in a written document which
is the only contract to which the finance company was a party. The agreement is a
written agreement with Mr Durlabh Patel. The argument seeks to contradict this and
make it an agreement with the rogue. It is argued that other evidence is always
admissible to show who the parties to an agreement are. Thus, if the contents of the
document are, without more, insufficient unequivocally to identify the actual individual
referred to or if the identification of the party is non-specific, evidence can be given to
fill any gap. Where the person signing is also acting as the agent of another, evidence
can be adduced of that fact. None of this involves the contradiction of the document:
Young v Schuler (1883) 11 QBD 651, which was a case of an equivocal agency
signature and it was held that evidence was admissible that the signature was also a
personal signature--"evidence that he intended to sign in both capacities ... does not
contradict the document, and is admissible ": per Cotton LJ, at p 655. But it is
different where the party is, as here, specifically identified *944 in the document:
oral or other extrinsic evidence is not admissible. Further, the rogue was no one's
agent (nor did he ever purport to be). The rule that other evidence may not be
adduced to contradict the provisions of a contract contained in a written document is
fundamental to the mercantile law of this country; the bargain is the document; the
certainty of the contract depends on it. The relevant principle is well summarised in
Phipson on Evidence 15th ed (2000), pp 1165-1166, paras 42-11 and 42-12:
"when the parties have deliberately put their agreement into writing, it is conclusively
presumed between themselves and their privies that they intend the writing to form a
full and final statement of their intentions, and one which should be placed beyond
the reach of future controversy, bad faith or treacherous memory."
(See also Bank of Australasia v Palmer [1897] AC 540, 545, per Lord Morris.) This
rule is one of the great strengths of English commercial law and is one of the main
reasons for the international success of English law in preference to laxer systems
which do not provide the same certainty. Hector v Lyons 58 P & CR 156 is simply an
application of this basic and long established principle. The father was claiming to be
able to enforce a contract of sale of land. The father had conducted the negotiations.
Woolf LJ said, at pp 160-161:
"In this case there is no dispute as to who, according to the written contract, are the
parties. The son was described in the contract as one of the parties. He does exist
and, in so far as there was a contract at all, it was between him and the other party
identified in the contract, Mrs Pamela Doris Lyons."
Sir Nicolas Browne-Wilkinson V-C delivered a judgment to the same effect. He
referred, at p 159, to the cases "entirely concerned with transactions between two
individuals face to face entering into oral agreement", saying:
"In my judgment the principle there enunciated has no application to a case such as
the present where there is a contract and wholly in writing. There the identity of the
vendor and of the purchaser is established by the names of the parties included in the
written contract."
Mr Hudson submitted, as he had to, that this decision was wrong and should be
overruled. In my opinion the Court of Appeal's decision was clearly correct and
correctly reasoned in accordance with well established principles.
50 The argument also fails on another ground. There was no consensus ad idem
between the finance company and the rogue. Leaving on one side the fact that the
rogue never had any intention himself to contract with the finance company, the hirepurchase "agreement" to which Mr Hudson pins his argument was one purportedly
made by the acceptance by the finance company, by signing the creditor's box in the
form, of a written offer by Mr Durlabh Patel to enter into the hire-purchase
agreement. This faces Mr Hudson with a dilemma: either the contract created by that
acceptance was a contract with Mr Durlabh Patel or there was no consensus ad idem,
the rogue having no honest belief or contractual intent whatsoever and the finance
company believing that it was accepting an offer by Mr Durlabh *945 Patel. On
neither alternative was there a hire-purchase agreement with the rogue.
51 It is as well to digress at this stage to consider the chain of contracts or alleged
contracts relied upon by Mr Hudson. First, Mr Hudson relies upon a contract of sale he
made with the rogue when he agreed to buy the motor car from the rogue. He says
he got a good title to it from the rogue under this contract notwithstanding that R had
no title. In support of this statute-based contention he argues that there was another
contract which he has to say was a contract of hire-purchase between the rogue and
the finance company, the supposed contract contained in the written hire-purchase
agreement. There is no dispute that the finance company had bought the motor car
from the dealer and was or had become the owner of the car at the time when the
finance company signed the document and thereby accepted the offer (if any) in the
written hire-purchase document. (That contract of purchase was never put in
evidence.) The title to the car was in the finance company. The hirer/debtor under the
"agreement" was Mr Durlabh Patel not the rogue. The rogue only comes into the
picture because he was the unidentified individual who came into the dealer's office
and caused the dealer to sell the motor car to the finance company and the dealer,
thereafter, to deliver it to him although he was not in fact Mr Durlabh Patel. (He, of
course, came into the story again later as the person who purported to sell the car to
Mr Hudson.) The dealer (as his witness signature testifies) apparently believed the
rogue when the rogue said his name was Mr Patel and negotiated with him, face-toface, the price at which the dealer would be willing to sell the car. That negotiation
enabled the dealer to fill in the appropriate finance details which the "customer"
should ask for. But the rogue never had any face-to-face dealings with the finance
company; he dealt with it solely by submitting a written document containing an offer
and acceptance clause. There is no room for the application of the "face-to-face "
principle between the rogue and the finance company. Nor was the dealer the agent
of the finance company to enter into any contract on behalf of the finance company.
The dealer is a mere facilitator serving primarily his own interests. If there could have
been any doubt or room for argument about this point, it is put beyond argument or
doubt by the terms of the offer and acceptance clause in the governing document. R
and the dealer are not two individuals conducting negotiations in which all the terms
necessary to constitute a binding contract are agreed.
52 As regards the delivery of the motor car by the dealer to the rogue, it is not in
dispute that, in making that delivery, the dealer was acting as the agent of the
finance company. But he was acting without authority. The dealer's authority was to
deliver the car to Mr Durlabh Patel, not to anyone else. That delivery did not create
any bailment of the car by the finance company to the rogue. The rogue was a thief.
Albeit by an elaborate but effective course of action, he stole the car from the
possession of the dealer just as surely as if he was a thief stealing it from the
forecourt. The dealer may have acted under an innocent mistake induced by the fraud
the rogue had practised on him; but it will, nevertheless, have been a tortious
disposal of the motor car by the dealer. But the matter does not stop there. It would
not be a delivery "under a hire-purchase agreement". This follows from the fact that
there was no hire-purchase agreement (or any agreement or contract) between the
finance company and the rogue. It further follows *946 from the fact that the only
'debtor' under the supposed agreement was Mr Durlabh Patel. It was never the rogue
and neither the finance company nor the rogue ever intended that it should be.
53 The final point was the fact that the purported customer's signature was not in
truth that of Mr Durlabh Patel. The supposed hire-purchase agreement therefore from
the outset lacked an essential ingredient and within the terms of the document was
never an offer eligible for acceptance. A forged signature is neither the signature of
the purported signatory nor of the forger. There may be an exception where the
"forger" had the authority of the actual party to sign on his behalf and in his name, in
which case it probably would not be a forgery unless there was some dishonest intent
to deceive. The same applies to using a "mere pseudonym" or a trading name. But
that is not this case.
54 It follows that the appeal must be dismissed and the majority judgment of the
Court of Appeal affirmed.
55 But, before I leave this case, I should shortly summarise why the argument of the
appellant's counsel was so mistaken. The first reason was that they approached the
question as if it was simply a matter of sorting out the common law authorities
relating to the sale of goods. They did not treat it as a matter of applying a statutory
exception to the basic common law rule, nemo dat quod non habet. Further, they did
not analyse the structure of the overall transaction and the consumer credit
agreement within it. Accordingly, they misrepresented the role of the dealer, wrongly
treating him as the contracting agent of the finance company which he was not. They
never analysed the terms of the written document and had no regard at all to the
offer and acceptance clause it contained which, if there was any contract between a
"debtor" and the finance company, governed their relationship and which expressly
set out the only way in which such a contract could come into existence. They made
submissions which contradicted the express written contract and were therefore
contrary to principle and long established English mercantile law. They submitted that
Cundy v Lindsay 3 App Cas 459 was wrongly decided and should be overruled,
substituting for it a general rule which, in disregard of the document or documents
which constitute the agreement (if any), makes everything depend upon a factual
inquiry into extraneous facts not known to both of the parties thus depriving
documentary contracts of their certainty. They sought to convert a direct
documentary contract with the finance company into a face-to- face oral contract
made through the dealer as the contracting agent of the finance company,
notwithstanding that the dealer was never such an agent of the finance company.
Finally they sought, having bypassed the written contract, to rely upon authorities on
oral contracts for the sale of goods, made face-to-face and where the title to the
goods had passed to the "buyer ", notwithstanding that this was a documentary
consumer credit transaction not a sale and, on any view, no title had ever passed to
R. In the result they have invited a review of those authorities by reference to the
particular facts of each of them. They have sought to draw your Lordships into a
discussion of the evidential tools, e g, rebuttable presumptions of fact and the socalled face-to-face "principle", used by judges in those cases to assist them in making
factual decisions (see also the dictum of Gresson P in Fawcett v Star Car Sales Ltd
[1960] NZLR 406, 413), notwithstanding that the present case concerns the
construction of a written contract. They forget that the, *947 presently relevant,
fundamental principles of law to be applied--consensus ad idem, the correspondence
of the contractual offer and the contractual acceptance, the legal significance of the
use of a written contract--are clear and are not in dispute. Inevitably over the course
of time there have been decisions on the facts of individual "mistaken identity" cases
which seem now to be inconsistent; the further learned, but ultimately unproductive,
discussion of them will warm academic hearts. But what matters is the principles of
law. They are clear and sound and need no revision. To cast doubt upon them can
only be a disservice to English law. Similarly, to attempt to use this appeal to
advocate, on the basis of continental legal systems which are open to cogent
criticism, the abandonment of the soundly based nemo dat quod non habet rule
(statutorily adopted) would be not only improper but even more damaging.
LORD MILLETT
56 My Lords, A makes an offer to B. B accepts it, believing that he is dealing with C.
A knows of B's mistake, and may even have deliberately caused it. What is the result
of the transaction? Is there a contract at all? There is obviously no contract with C,
who is not a party to the transaction and knows nothing of it. But is there a contract
with A? And if so is it void or merely voidable?
57 Generations of law students have struggled with this problem. They may be
forgiven for thinking that it is contrived by their tutors to test their mettle. After all,
the situation seems artificial and is one which is seldom likely to arise in practice, at
least in the absence of fraud. Unfortunately fraudulent impersonation is not at all
uncommon today. The growth in the number of credit transactions, often entered into
electronically between persons unknown to each other, has led to a surge in what has
been called "theft of identity", that is the fraudulent assumption of another's identity
by a customer in order to have the wrong account debited or to misdirect inquiries
into his own creditworthiness. In the classic case A, fraudulently masquerading as C,
buys goods on credit from B; B, having conducted appropriate checks to satisfy
himself that C is worthy of credit and believing A to be C, lets A have possession of
the goods; and A thereupon sells the goods to D, an unsuspecting purchaser, before
disappearing without paying for them. Who is to bear the loss? That depends on
whether D, who has paid for the goods, has obtained title to them, for if not then B
can reclaim them. But D will have obtained title only if A was able to transfer title to
him, and this turns on whether the transaction between A and B resulted in a voidable
contract for the purchase of the goods by A (which B will have been unable to avoid in
time) or no contract at all.
58 The problem is sometimes mentioned in the textbooks in the section which deals
with the formation of contract, where the question is whether a contract has been
concluded; but it is more usually dealt with in the section which is concerned with the
effect of mistake and in particular "mistaken identity ", where the question is said to
turn on whether A's identity is (i) "fundamental" (in which case the contract is
completely void) or (ii) "material " but not "fundamental" (in which case the contract
is merely voidable). In his dissenting judgment in Ingram v Little [1961] 1 QB 31, 64
Devlin LJ distinguished between the two questions and observed that it was easy to
fall into error if one did not begin with the first question, *948 whether there is
sufficient correlation between offer and acceptance to bring a contract into existence.
But if there is, I question whether the contract should be held to be void for mistake
rather than merely voidable.
59 As I have said, the situation is seldom likely to arise in practice in the absence of
fraud, and where the fraud is not directed to the identity of the offeror the contract is
only voidable, not void, for the victim of deception ought to be able to elect to affirm
the contract if he chooses to do so. It seems anomalous that a mistake which is
induced by fraud should have a less vitiating effect than one which is not; and it is
difficult to see why a mistake induced by fraud should make a contract altogether void
if it is a mistake as to the offeror's identity (whatever that may mean) and not if it is
a mistake as to some other attribute of his such as his creditworthiness which may be
equally or more material.
60 As Treitel observes (The Law of Contract, 10th ed (1999), p 277) it is often
difficult to say precisely what mistake has been made and, even when this is clear, it
is often difficult to say whether it should be classified as a mistake of identity or of
attribute. As between A and B themselves, of course, it does not normally matter
whether the contract is void or merely voidable; it obviously cannot be enforced by A
against B's wishes in either case. The question usually assumes importance only
where an innocent third party is involved, and then it is critical. Under the law as it
stands at present, his title depends on whether the fraudster obtained the goods in
his own name by means of a false or forged credit reference or in the name of
another by means of a genuine reference relating to that other. This is indefensible. I
take the view that the law should if at all possible favour a solution which protects
innocent third parties by treating the contract as voidable rather than void, whether
for fraud or for mistake.
61 My Lords, I think that the time has come to follow the lead given by Lord Denning
MR more than 30 years ago in Lewis v Averay [1972] 1 QB 198. He roundly rejected
the theory that if a party is mistaken as to the identity of the person with whom he is
contracting there is no contract, or that if there is a contract it is null and void so that
no property can pass under it: see pp 206-207. He thought that the doctrine, derived
from the writings of Pothier, should not be admitted as part of English law but should
be "dead and buried ". As he observed, it gives rise to fine distinctions which do no
good to the law, and it is unjust that an innocent third party, who knows nothing of
what passed between the rogue and his vendor, should have his title depend on such
refinements.
62 But it is still necessary to answer the logically anterior and more difficult question:
does the transaction result in the formation of a contract between A and B? There is
clearly a transaction between them, for B has let A have possession of the goods and
take them away, usually with the intention that he should be free to deal with them
as owner. But is the transaction contractual?
63 It is trite law, as Devlin LJ explained in the passage immediately following that
cited above, that before a contract can come into existence there must be offer and
acceptance, and these must correspond. The offer must be addressed to the offeree,
either as an individual or as a member of a class or of the public. The acceptance
must come from one who is so addressed and must itself be addressed to the offeror.
It is not possible in law *949 for a person to accept an offer made to someone else;
or to intercept an acceptance of someone else's offer and treat it as an acceptance of
his own.
64 This is usually straightforward enough, at least in the absence of fraud. As my
noble and learned friend, Lord Phillips of Worth Matravers, observes, there is normally
no difference between the identity of the person to whom the offer or acceptance is
directed and the person for whom it is intended. But what if, by reason of fraud, the
two are not the same? What if A, posing as C, makes an offer to B which B purports
to accept? B directs his acceptance to A, but intends it for C. It does not help to
substitute the question: "To whom was B's acceptance made?" This merely raises the
question: "What do you mean by ' made'?"
65 The outcome is said to depend on B's intention objectively ascertained, and this is
usually treated as if it were a straightforward question of fact to be determined on the
evidence. In Ingram v Little [1961] 1 QB 31 Pearce LJ said, at p 61, that "Each case
must be decided on its own facts." This is singularly unhelpful, since it involves
asking: did B intend to contract with A believing him to be C? Or with C believing him
to be A? The question is meaningless. As Devlin LJ pointed out in Ingram v Little, at p
65:
"If Miss Ingram had been asked whether she intended to contract with the man in the
room or with P G M Hutchinson, the question could have no meaning for her, since
she believed them both to be one and the same. The reasonable man of the law--if he
stood in Miss Ingram's shoes--could not give any better answer ... All that Miss
Ingram or any other witness in her position can say is that she did in fact accept the
offer made to her; and that, if she had not been tricked or deceived, she would not
have accepted it." (Emphasis added.)
66 In this situation the courts have distinguished between transactions entered into in
writing and transactions entered into orally between parties who are in the presence
of each other. In the former case B's intention is ascertained by construing the
description of the counterparty in the contract. This naturally identifies C, the person
whose identity A has fraudulently assumed, and (provided that C actually exists)
invariably leads to the conclusion that there is no counterparty and therefore no
contract. In the latter case, the courts have adopted a different approach. They have
introduced a rebuttable presumption that, where parties deal with each other face-toface, each of them intends to contract with the physical person to whom he addresses
the words of contract. Unless the presumption is rebutted, this must lead to the
conclusion that there is a contract with the impostor.
67 I do not find this satisfactory. What evidence is sufficient to rebut the
presumption? As Devlin LJ stressed, it cannot be rebutted by piling up evidence that B
would never have accepted the offer if he had not thought that it had been made by
C. Such evidence merely shows that the deception was material; it does not establish
the identity of B's counterparty. There might perhaps be something to be said for
making the presumption conclusive. This appears to have been the law at one time in
the United States. In Corbin on Contracts (1960 ed), p 619, section 602 it is stated
that "The courts hold that if A appeared in person before B, impersonating C, an
innocent purchaser from A gets property in the goods as against B." But *950 there
is surely nothing to be said for resorting to a rebuttable presumption in order to
resolve a question of fact which is incapable of being determined by evidence. If there
is no test by which the question can be answered on the evidence, there is none by
which the court can determine whether the presumption has been rebutted.
68 But the real objection to the present state of the law, in my view, is that the
distinction between the face-to-face contract and other contracts is unrealistic. I leave
aside the criticism of the face-to-face rule made by Corbin on Contracts, at p 620,
that it is "somewhat fanciful to hold that B intends to sell the goods to the physical
body of A in front of him, although that body is indeed part of what we call 'identity' ".
My difficulty is that I cannot see that there is any difference in principle between the
two situations when it comes to identifying B's counterparty. In both cases B's
acceptance is directed to the impostor but intended for the person whose identity he
has assumed. Carleton Allen described the distinction as "admittedly fine, and [one
which] has always caused doubt, though not necessarily dissent, in a good many
minds": see "Mistaken Identity" (1928) 44 LQR 72, 73. He observed that textbook
writers were divided on the subject, and that in the then most recently published
treatise on contracts (Salmond & Winfield, Law of Contracts (1927), p 189) the high
but unhappily posthumous authority of Sir John Salmond leaned strongly against the
doctrine.
69 In Ingram v Little [1961] 1 QB 31 Devlin LJ said, at p 66, that "the presumption
that a person is intending to contract with the person to whom he is actually
addressing the words of contract seems to me to be a simple and sensible one ..." I
respectfully agree. But why should it be adopted only in the case of a contract entered
into between persons who deal in the physical presence of each other? If the offeree's
words of acceptance are taken to be addressed to the physical person standing in his
presence who made the offer, what is the position where they deal with each other by
telephone? Is the disembodied voice to be equated with physical presence? Is it
sufficient that the parties are in the hearing of each other? Does it make a difference
if the dealing is by televisual link, so that the parties are in the hearing and sight but
not the presence of each other? New means of communication make the distinction
untenable.
70 But in truth the distinction was always unsound. If the offeree's words of
acceptance are taken to be addressed to the physical person standing in his presence
who made the offer, why is the contract entered into by correspondence different?
Why is the offeree's letter of acceptance not taken to be addressed to the physical
person who made the written offer which he is accepting? The offeree addresses the
offeror by his assumed name in both cases. Why should this be treated as decisive in
the one case and disregarded in the other? Indeed, the correlation between offer and
acceptance is likely to be greater in the case of a contract entered into by
correspondence, since the offeree's letter of acceptance will either be sent to the
impostor at his own address or be delivered to him personally and it will almost
certainly contain internal references to his offer.
71 In my opinion there are only two principled solutions to the problem. The law must
give preference, either to the person for whom the offer or acceptance is intended, or
to the person to whom it is directed, and must do so in all cases as a matter of law.
The difficulty is in deciding which solution should be adopted, for there is much to
commend each of them.
72 *951 The first solution, which gives preference to the person for whom the offer
or acceptance is intended, possibly accords more closely to the existing authorities,
which treat the face-to-face transaction as an exception to the general rule, and with
the decision in Cundy v Lindsay 3 App Cas 459, the only case on the subject which
has come before the House. It also accords more closely with the parties' subjective
intentions, for B intends to deal with C, especially if he has checked his
creditworthiness, and not with A, of whom he has never heard; while A has no
intention of being bound by contract at all. From his point of view the supposed
contract is merely a pretence to enable him to get hold of goods without paying for
them. He does not need a contract, for he is content with possession without title. In
the days when the law distinguished between trickery and deception, he would have
obtained possession by a trick rather than title by false pretences.
73 The strongest argument in favour of this solution, I suppose, is that it could be
said to be based on the parties' own assessment of what they mean by the
counterparty's "identity". Ultimately this must refer to a physical person, but a
physical person can only be identified by describing his or her attributes. For this
purpose it is customary to refer to a person's name and address, which are usually
though not always unique to one person. But names are merely identifying labels and
can be assumed without any intention to deceive. A person is free to adopt whatever
name suits his fancy, and may validly contract under an alias. Even if he has assumed
a false name for the sole purpose of deceiving the counterparty, there is a contract so
long, at least, as there is no real person of that name: see King's Norton Metal Co Ltd
v Edridge, Merrett & Co Ltd 14 TLR 98.
74 But as Treitel observes (The Law of Contract, 10th ed, p 277) a person may be
identified by reference to any one of his attributes. He may be identified as "the
person in the room", "the person who spoke on the telephone", "the person who
appended the illegible signature", "the writer of the letter under reply", or "the person
who made the offer"; but he may also be identified, and sometimes more relevantly,
as "the person whose creditworthiness has been checked and found to be
satisfactory". Any of these may be the means of identifying a unique person. An
automated telling machine is programmed to identify a customer by a combination of
a PIN number and a number encrypted on the card which is inserted into the
machine. In an increasingly electronic age we are accustomed to identifying ourselves
by PIN numbers and passwords; the need to eliminate fraud may in time cause us to
identify ourselves by retinal imagery, which at least has the advantage of being a
feature of the physical body. But even in the case of a credit card transaction there is
an ambiguity. Is the customer to be identified as the person who produces the card?
Or as the person whose card is produced? The whole point of a credit card fraud is
that the goods should be supplied to the person who produces the card while the cost
is debited to the account of the person whose card is produced.
75 Given the equivocal nature of a person's "identity", there is something to be said
for selecting those aspects of the offeror's identity which are material in causing the
other party to accept the offer. In the present case, for example, Mr Patel's name
address and date of birth had no intrinsic relevance in themselves. The claimant
would have entered into the transaction with anyone, whatever his name and address
or date of birth, so *952 long as it was satisfied that he was worthy of credit. Mr
Patel's personal details were merely the information which enabled it to conduct
inquiries into the credit of the person it assumed to be its customer. It makes
commercial sense to treat a contract made in these circumstances as purporting to be
made between the finance company and the subject of its inquiries rather than with
the person who merely produced the information necessary to enable it to make
them.
76 Nevertheless I have come to the conclusion that it is the second solution which
ought to be adopted. All the considerations which I have mentioned, and which seem
to favour the first solution, when properly analysed go to the mechanics of the
deception and its materiality rather than to the identity of the offeror. They ought to
come into play when consideration is given to the second question, whether the
contract is voidable, rather than to the first, whether there is sufficient correlation
between offer and acceptance ("consensus ad idem") to bring a contract into
existence. Until the fraud is exposed and it is discovered that A is not C, the existence
of a contract is not in doubt. The fraud is relevant to the question whether the
contract is enforceable against B rather than its existence.
77 I regard King's Norton Metal Co Ltd v Edridge, Merrett & Co Ltd 14 TLR 98 as
worthy of more attention than it has usually been given. In that case, where the
contract was entered into by correspondence, the rogue assumed a fictitious name in
order to give a spurious impression of respectability. The court held that there was a
valid (though voidable) contract. The decisive feature was thought to be that there
was no one of the assumed name. A L Smith LJ is reported as follows, at p 99:
"The question was, With whom, upon this evidence, which was all one way, did the
plaintiffs contract to sell the goods? Clearly with the writer of the letters. If it could
have been shown that there was a separate entity called Hallam and Co [C] and
another entity called Wallis [A] then the case might have come within the decision in
Cundy v Lindsay 3 App Cas 459. In his opinion there was a contract by the plaintiffs
with the person who wrote the letters, by which the property passed to him. There
was only one entity, trading it might be under an alias, and there was a contract by
which the property passed to him." (Emphasis added.)
78 It is unclear whether it would have made a difference if, unknown to the plaintiffs,
there had been an entity called Hallam and Co; or if to the knowledge of both parties
there were many such entities, as in the cases where a man used to book a hotel
room for himself and a girlfriend under a common but fictitious name in order to give
the impression (when such things mattered) that they were married. The case is
different where the impostor assumes the name and address of a real person of
substance when entering into a credit transaction. In such a case his purpose is to
direct inquiries to that person's credit rather than his own. A better explanation of
King's Norton Metal Co Ltd v Edridge, Merrett & Co Ltd is that the rogue merely
assumed a false name and did not go further and assume another person's identity.
But the distinction is a fine one which it may not always be possible to draw, and in
any case depends on the nature and purpose of the deception and is accordingly
relevant to its effect on the mind of the offeree and not to the correlation between
offer and acceptance.
79 *953 The typical fraudulent credit card transaction is also illuminating. There is
clearly a transaction with the impostor who produces the card and who receives cash
or goods (say a cinema ticket) in exchange. If the transaction is contractual in nature
(as in the case of the cinema ticket) why should the transaction be thought to be with
one person and the contract with another? There is only one transaction whether the
party who parts with the goods debits the right account or is deceived into debiting
the wrong one. Where cash is extracted from an ATM the fraud is possible because
the machine is programmed to supply the cash to the person who produces the card
and to debit the account of the person whose card is produced. In the same way the
staff who handled the transaction in the present case on behalf of the claimant were
instructed (programmed) to obtain the customer's personal details, run credit checks
on the person whose details were produced, and authorise the dealer to deliver
possession of the vehicle to the person who produced them.
80 It is noticeable that, when recounting the facts objectively, judges often find
themselves obliged to describe C as having accepted A's offer. I have already cited
such passages from Ingram v Little [1961] 1 QB 31 and King's Norton Metal Co Ltd v
Edridge, Merrett & Co Ltd 14 TLR 98. In the former case, where the parties dealt with
each other face to face, Devlin LJ has C say, at p 65, "that she did in fact accept the
offer made to her; and that, if she had not been tricked or deceived, she would not
have accepted it ". In the latter, where the contract was entered into by
correspondence, A L Smith LJ said that the offeree "clearly" contracted with the writer
of the letters which contained the offer, that is, with A.
81 In my opinion, once one accepts that there are two questions involved: (i) did a
contract come into existence at all? and (ii) if so was the contract vitiated by fraud or
mistake? there is only one principled conclusion. Whatever the medium of
communication, a contract comes into existence if, on an objective appraisal of the
facts, there is sufficient correlation between offer and acceptance to make it possible
to say that the impostor's offer has been accepted by the person to whom it was
addressed. While a person cannot intercept and accept an offer made to some one
else, he should normally be treated as intending to contract with the person with
whom he is dealing. Provided that the offer is made to him, then whether his
acceptance of the offer is obtained by deception or mistake, and whether his mistake
is as to the identity of the offeror or some material attribute of his, the transaction
should result in a contract, albeit one which is voidable.
82 This rule is easy to apply and accords with principle by distinguishing between the
formation of a contract as a question of fact to be determined objectively and the
consequences of mistake or fraud which depend on its effect on the mind of the
person affected. It avoids undesirable refinements and gives a measure of protection
to innocent third parties. Of course, someone has to bear the loss where there is
fraud, but it is surely fairer that the party who was actually swindled and who had an
opportunity to uncover the fraud should bear the loss rather than a party who entered
the picture only after the swindle had been carried out and who had none. In the
present case, the claimant could easily have exposed the fraud by writing to Mr Patel,
whose address it had been given, and asking him to confirm his intention to proceed
with the proposed transaction. If it had been one for which statute required a coolingoff period, it no doubt it would have done.
83 *954 In the Court of Appeal [2002] QB 834 both Sedley LJ (who dissented) and
Brooke LJ, at p 855, para 51, expressed disquiet at "the sorry condition" of the law. In
the former's view, with which I agree, the decision in Cundy v Lindsay 3 App Cas 459
stands in the way of a coherent development of this branch of the law. We have the
opportunity to restate the law, and cannot shirk the duty of putting it on a basis which
is both just and principled, even if it means deciding that we should no longer follow a
previous decision of the House.
84 We cannot leave the law as it is. It is neither fair nor principled, and not all the
authorities from which it is derived can be reconciled; some, at least, must be
overruled if it is to be extricated from the present quagmire. If the law is to be
rationalised and placed on a proper footing, the formulation which I have proposed
has the merit of according with the recommendations made in the Twelth Report of
the Law Reform Committee on the Transfer of Title to Chattels (Cmnd 2958) and in
Anson's Law of Contract, 28th ed, p 332. It would also bring English law into line with
the law both in the United States and in Germany. The law of the United States has
not stood still. Section 2-403 of the Uniform Commercial Code, 14th ed, p 117
provides by subsection (1):
"A person with voidable title has power to transfer a good title to a good faith
purchaser for value. When goods have been delivered under a transaction of purchase
the purchaser has such power even though--(a) the transferor was deceived as to the
identity of the purchaser ..."
Any restriction of the rule to face-to-face transactions has disappeared. In the Official
Comment on the section, p 118, reference is made to "the long-standing policy of civil
protection of buyers from persons guilty of such trick or fraud". This seems to me to
be a policy which accords with good sense and justice and one which we ought to
adopt for ourselves. I agree with the view of Professor Atiyah, An Introduction to the
Law of Contract, 5th ed (1995), p 86 that "a person who hands goods over to a
stranger in return for a cheque is obviously taking a major risk, and it does not seem
fair that he should be able to shift the burden of this risk on to the innocent third
party".
85 Under German law, too, the innocent third party obtains a good title, though this
is a consequence of the law of property rather than the law of contract. Article 932 of
the German Civil Code provides that a purchaser acting in good faith acquires title
where he obtains possession from a seller who has no title. The purchaser is not in
good faith if he knew, or by reason of gross negligence did not know, that the goods
did not belong to the seller. Thus, under German law, whether or not A obtained title
from B, he is able to pass a good title to D.
86 German law reaches this conclusion by admitting a far wider exception to the
nemo dat quod non habet rule than we accept, and this enables it to dispense with
the need to decide the contractual effect of mistaken identity (and the meaning of
"identity" in this context) or to conduct a fruitless inquiry into the identity of the
intended counterparty. Our inability to admit such an exception compels us to adopt a
different analysis, but it would be unfortunate if our conclusion proved to be different.
Quite apart from anything else, it would make the contemplated harmonisation of the
general principles of European contract law very difficult to achieve.
87 *955 Where does this leave the authorities? Most of those which are concerned
with face-to-face transactions can stand with the exception of the decision of the
majority of the Court of Appeal in Ingram v Little [1961] 1 QB 31, which is
inconsistent with Lewis v Averay [1972] 1 QB 198 and should be overruled. I would
confirm the decision in Phillips v Brooks Ltd [1919] 2 KB 243, 246-247 where
Horridge J held that the shopkeeper had
"contracted to sell and deliver [the ring] to the person who came into his shop ... who
obtained the sale and delivery by means of the false pretence that he was Sir George
Bullough ... [The shopkeeper's] intention was to sell to the person present, and
identified by sight and hearing ..."
In my opinion the judge's reasoning cannot be faulted. He distinguished between the
two questions, and treated the identity of the purchaser as a question of fact to be
determined objectively and without regard to the evidence that the shopkeeper had
no intention of selling the goods to anyone other than Sir George Bullough.
88 In Gordon v Street [1899] 2 QB 641 and Said v Butt [1920] 3 KB 497 the dispute
was between A and B; no third party was involved. In each case it was sufficient to
hold that any contract which resulted was voidable. Said v Butt is a celebrated case
which merits further attention. The plaintiff wished to attend the first night of a play.
He had had serious differences of opinion with the management of the theatre, and he
knew that an application for a ticket in his own name would be refused. He therefore
arranged for a friend to go to the theatre and buy a ticket for him without disclosing
the fact. When he turned up for the performance he was refused admission. His claim
for damages was dismissed. The evidence showed that a first night is a special event
with characteristics of its own, and that first night tickets are only given or sold to
persons whom the management selects and wishes to favour. McCardie J found that
the purchaser's identity was a material element in the formation of the contract and
that the failure to disclose the fact that the ticket was bought on his behalf prevented
the plaintiff from asserting that he was the undisclosed principal. In my opinion that
conclusion was inescapable. The case has usually been taken to be an example of a
contract which is void for mistake. I do not think that it is. There can be little doubt
that the friend who bought the ticket could have made use of it to gain admission
himself. In my opinion the case is an example of the rule that an undisclosed principal
cannot intervene where the nature of the contract shows that the contract was
intended to be with the agent personally: see Collins v Associated Greyhound
Racecourses Ltd [1930] 1 Ch 1. The evidence showed that tickets for a first night are
not transferable, from which it follows that they are incapable of being bought for an
undisclosed principal; so that even on its own terms the contract could not be
enforced by the plaintiff. Admittedly McCardie J's judgment did not proceed on this
basis; but he did not hold there to be no contract at all even with the person who
bought the ticket.
89 Hardman v Booth (1863) 1 H & C 803 is an important case because it formed the
foundation of the reasoning of the House in Cundy v Lindsay 3 App Cas 459. It has
been taken to be an example of the same category of case and inconsistent with
Phillips v Brooks [1919] 2 KB 243: see A L Goodhart, "Mistake as to Identity in the
Law of Contract" (1941) 57 LQR 228, *956 241. But I do not think it is either. B
called at the premises of C & Co, where he met A, whom he was fraudulently led to
believe to be a partner in the firm of C & Co A ordered goods from B and, after taking
delivery, pledged them to D before becoming bankrupt. B sued D in trover. The action
succeeded. The Court of Exchequer held that there was no sale to A because B did not
deal with him personally. In my opinion the situation was quite different from that in
the other cases under discussion. B dealt with A face to face, but he did not deal with
him as principal. Even objectively he did not contract with him at all. He was not
mistaken as to A's identity, but as to his authority. But there was certainly a contract
of some sort between A and B, for A would be liable to B for breach of warranty of
authority. Whether the case was rightly decided depends on whether there is an
analogy with the case where a person contracts as agent for a non-existent principal.
There the agent is held to have contracted on his own account and to be personally
liable on the contract. I would leave the point open, but it makes little sense to make
D's title depend on whether A falsely held himself out to be acting as agent for a
principal who did not exist or for a principal who did exist but had not authorised him
to contract on his behalf.
90 The principal obstacle which has prevented the courts from rationalising this
branch of the law has been Cundy v Lindsay 3 App Case 459, a decision of this House.
It was concerned with a contract entered into by correspondence. A rogue named
Blenkarn, posing as Blenkiron & Co, ordered goods by letter from the plaintiffs. They
replied to the letter, accepted the order and despatched the goods to the name and
address they had been given. Blenkarn then sold them to the defendants. The House
held that the defendants obtained no title. The case is treated in the textbooks as an
example of a contract which is void for unilateral mistake, but this was not the basis
of the decision. The word "mistake" appears only once in the speeches, and then only
in reference to the address of the premises to which the plaintiffs despatched the
goods. Lord Cairns LC observed, at p 466, that it was not a case in which a contract
could be impeached for fraud, but where a contract never came into existence. There
was no contract between the plaintiffs and the cheat Blenkarn because, at pp 465466:
"Of him they knew nothing, and of him they never thought. With him they never
intended to deal. Their minds never, even for an instant of time rested upon him, and
as between him and them there was no consensus of minds which could lead to any
agreement or any contract whatever. As between him and them there was merely the
one side to a contract, where, in order to produce a contract, two sides would be
required."
Lord Hatherley spoke to the same effect, at p 467: "if there could be said to have
been any sale at all, it failed for want of a purchaser." It was not a sale to Blenkarn
"with whom the plaintiffs had not, and with whom they did not wish to have, any
dealings whatever".
91 As an authority on the formation of contract the decision is, with respect,
unconvincing. That the plaintiffs did not wish or intend to have any dealings with
Blenkarn is beyond dispute; but it is far from obvious that they did not actually have
such a dealing even though it was only as a result of the deception practised on them.
Lord Hatherley and Lord Penzance felt unable *957 to distinguish the case from
Hardman v Booth 1 H & C 803, although in my view the two cases are not
comparable. Lord Cairns dwelt on the plaintiffs' subjective state of mind, which was of
course affected by the fraud, and gave no attention to the question whether,
approaching the case objectively, the plaintiffs had accepted Blenkarn's offer. Lord
Penzance, at pp 471-472, initiated the unfortunate distinction between cases of
persons dealing in the presence of each other and other cases, without explaining why
this was material, let alone decisive.
92 The plaintiffs, indeed, "knew nothing" of the individual named "Blenkarn " and
they addressed their letter of acceptance to "Blenkiron & Co". But that was because
they had been deceived into believing that the offer came from Blenkiron & Co.
Throughout the speeches in this House it was assumed that the plaintiffs' letter of
acceptance was directed and sent, as the goods were later directed and sent, to the
intended recipient (Blenkiron & Co) but at the wrong address. If the facts of that case
are viewed objectively, however, with a view to ascertaining whether there was the
necessary correlation between offer and acceptance and without reference to the
deception, the matter wears a very different aspect. The order was placed by
Blenkarn (posing as Blenkiron & Co) writing from his own address (which was not the
address of Blenkiron & Co) and was duly accepted by the plaintiffs in the belief that
the order came from Blenkiron & Co. They replied to Blenkarn (in his assumed name
as Blenkiron & Co) at the address he had given (being his own address and not that of
Blenkiron & Co) by a letter which referred to and accepted his order; and in due
course they fulfilled it.
93 In my view the proper conclusion on these facts is that the plaintiffs contracted
with Blenkarn in the mistaken belief, induced by his fraud, that they were dealing with
Blenkiron & Co, and that the resulting contract was voidable for fraud. If the plaintiffs'
subjective state of mind, induced by the fraud, is put on one side, there is no
justification for the question-begging assumption that the plaintiffs' letter of
acceptance was directed to Blenkiron & Co and that it was the name which was right
and the address which was wrong. Nor is there any justification for the suggestion
that the signature was a forgery. Blenkarn, who signed the letter, did not claim that it
was someone else's signature; he acknowledged and asserted that it was his own.
Even those who consider that the case was rightly decided concede that the rogue
could have been sued for the price of the goods: see Treitel, The Law of Contract, p
284. But that presupposes that there was sufficient correlation between offer and
acceptance to bring a contract into existence, albeit one which was void (or voidable)
at the instance of the party deceived. Yet this was the very proposition which the
House rejected.
94 The case can usefully be contrasted with Boulton v Jones (1857) 2 H & N 564,
which falls on the other side of the line and was in my opinion rightly decided. The
defendant sent to the shop of one Brocklehurst a written order for goods. The order
was addressed to Brocklehurst by name. Unknown to the defendant, Brocklehurst had
earlier that day sold and transferred his business to Boulton. Boulton fulfilled the
order and delivered the goods to the defendant without notifying him that he had
taken over the business. The defendant accepted the goods and consumed them in
the belief that they had been supplied by Brocklehurst. When he received Boulton's
invoice he refused to pay it, claiming that he had intended to deal *958 with
Brocklehurst personally, since he had dealt with him previously and had a set-off on
which he had intended to rely. The Court of Exchequer held that the defendant was
not liable for the price.
95 There was, of course, a preliminary question of construction, whether the
defendant's order could be interpreted as addressed, not to Brocklehurst personally,
but to the proprietor of the shop for the time being. The court held that it could not.
This point need not detain us further. Three of the four judges decided the case on
the straightforward ground that the offer was addressed to Brocklehurst and could not
be accepted by Boulton. (I put on one side the judgment of Bramwell B which, though
the most frequently cited, was condemned by Professor Goodhart "Mistake as to
Identity in the Law of Contract " 57 LQR 228, 233-234 as the least satisfactory.)
96 On this analysis, Boulton made a counter-offer which the defendant accepted in
the mistaken belief that it was made by Brocklehurst. The mistake was material
because of the existence of a set-off against Brocklehurst but not against Boulton; so
that the contract which resulted from the counter-offer was voidable. The question
then arose whether the defendant, who had received and consumed the goods, was
liable on a quantum valebat. It was held that he was not, since he consumed them in
the belief that he could discharge his liability to pay by set-off. We would classify the
case today as an example of a claim in unjust enrichment being defeated by a change
of position defence.
97 The contractual claim arising from the defendant's original order failed because,
objectively speaking, there was no correlation between offer and acceptance. This is
the same ground as that which was later to form the basis of the decision in Cundy v
Lindsay 3 App Cas 459 but the facts of the two cases are very different. In Boulton v
Jones 2 H & N 564 the goods were ordered from Brocklehurst but supplied and
invoiced by Boulton; the acceptance did not correspond with the offer. In Cundy v
Lindsay the goods were ordered by Blenkarn posing as Blenkiron & Co and supplied
and invoiced to him in that name. Outwardly the acceptance did correspond with the
offer. Objectively speaking there was consensus ad idem, though this was vitiated by
the fraud which produced it.
98 The last case to which I need to refer is Hector v Lyons 58 P & CR 156. This was a
very curious case. It concerned a contract for the sale and purchase of land. Mr
Hector senior negotiated with Mrs Lyons for the purchase of her property. They
negotiated personally, at first over the telephone and then face-to-face. Throughout
the negotiations, for a reason which was never explained, Mr Hector acted in the
name of his son, Mr Hector junior, who was under age. It is not clear whether the
parties entered into an agreement subject to contract, but if they did it would have
been signed by Mr Hector senior in his son's name. He instructed solicitors to act for
him, again in his son's name, and in due course contracts were signed and
exchanged, the two parts being in identical terms and giving Mr Hector junior's name
as the name of the purchaser. Mr Hector senior signed his part of the contract in his
son's name. Mrs Lyons refused to complete and Mr Hector senior brought an action
for specific performance. He did so in his own name. The deputy judge dismissed the
action; the Court of Appeal dismissed Mr Hector senior's appeal.
99 *959 It has been suggested that the action rightly failed because there was no
identity between the name of the plaintiff in the writ and that in the contract which he
was claiming to enforce. But this was not the ground of decision and is without
substance. The objection could readily be met if necessary by amending the writ to
add after the name of the plaintiff the words "also known as".
100 It might have been an understandable ground for refusing equitable relief that it
was not at all clear to the court what was going on, particularly as Mr Hector senior's
testimony was thoroughly unsatisfactory. But that was not the basis of the decision
either. The Vice-Chancellor held that there was no contract with Mr Hector senior. The
identity of the parties to a written contract was established by the names stated in
the contract: p 159. The only question for the court was to identify who they were,
and this was a question of fact.
101 So far I respectfully agree with the Vice-Chancellor. Where I part company with
him is at the next step, when he affirmed the deputy judge's finding of fact that the
purchaser was Mr Hector junior. That the name of the purchaser stated in the contract
was the name of Mr Hector junior and not that of Mr Hector senior was established as
a fact. But it does not at all follow that the party who contracted as purchaser in that
name was Mr Hector junior. The evidence plainly showed that it was not. He knew
nothing of the transaction, and the vendor did not deal or intend to deal with him. To
adapt Lord Cairns' words (Cundy v Lindsay 3 App Cas 459, 465) (but in the converse
case, for we are now talking of C, not of A), "of him she knew nothing, and of him she
never thought. With him she never intended to deal."
102 In my opinion the evidence demonstrated beyond doubt that the purchaser was
in fact Mr Hector senior, who for some reason of his own had adopted his son's name
for the purpose of entering into the contract. He was identified as the person who in
fact negotiated the purchase with the vendor and agreed to pay the purchase price,
who signed any agreement subject to contract which there may have been, who
instructed solicitors to act on his behalf as purchaser, and who signed the purchaser's
part of the contract. The vendor was neither deceived nor mistaken. She not only
intended to deal but actually dealt with Mr Hector senior. The only fact in respect of
which she was mistaken was that the name in which he contracted was not his real
name but that of his son, and that was not material.
103 My Lords, the identification of the parties to a written instrument is, as Sir
Nicolas Browne-Wilkinson V-C held, only partly a question of construction. That is the
first step in the process, and it will often be enough. It would have been enough in
Boulton v Jones 2 H & N 564 if the court had accepted the submission that the order
was addressed to the proprietor of the shop for the time being and not to Mr
Brocklehurst personally. But once it is established that the person whose name and
other personal details are stated in the contract and the person who stated them and
signed the contract are not the same, the question immediately arises: which of them
should be treated as the counterparty? Do the name and other details included in the
contract refer to the person to whom they belong or to the impostor who included
them in order to identify himself? This is not simply a question of construction. It is
partly a question of fact and partly a question of law. To say, as my noble and learned
friend, Lord Hobhouse of Woodborough, does, *960 that it is a question of
construction which admits of only one answer, with respect simply begs the question.
104 How should the question be answered in the present case? The case is not unlike
Hector v Lyons 58 P & CR 156 with the important difference that in the present case
the deception was material and induced the making of the contract. If there was a
contract with the rogue, it was voidable for fraud.
105 But was there such a contact at all? The contact came into being when the
claimant executed its part of the agreement. The two parts corresponded in every
material particular. They made it clear that the hirer was the person named on the
front of the document and who had signed the document. This appeared to be a Mr
Durlabh Patel, with an address in Leicester, whose personal details were given. But in
fact it was not Mr Durlabh Patel at all. He knew nothing of the transaction and his
driving licence had been stolen. The person who identified himself as Mr Durlabh
Patel, provided Mr Durlabh Patel's personal details, and signed the document in Mr
Durlabh Patel's name was not Mr Durlabh Patel but an impostor.
106 The object of the deception was to misdirect the claimant's credit inquiries. In
this it succeeded. Having satisfied itself that Mr Durlabh Patel, whom it believed to be
its customer, was worthy of credit, it accepted the offer which the impostor had
made, signed its part of the agreement, and authorised the dealer to deliver
possession of the car to his customer as hirer under the agreement.
107 But who was his customer? It was not Mr Durlabh Patel. In my opinion it was
plainly the impostor. Any other conclusion would mean that the dealer parted with the
vehicle to the impostor without authority and would, presumably, be liable in
conversion if the vehicle proved to be irrecoverable. This is far removed from reality.
The claimant and the dealer both believed that the customer who was hiring the car
and Mr Durlabh Patel were one and the same; but the claimant did not make that a
condition of the dealer's authority to part with the car. From first to last it believed
that the impostor who attended the dealer's showroom, gave his name as Mr Durlabh
Patel, and signed the agreement in that name, was indeed Mr Durlabh Patel; in that
belief it entered into a hiring agreement and authorised the dealer to deliver
possession of the car to the customer who had so identified himself. In my opinion,
the claimant not only took a credit risk, but also took the risk that the customer who
was hiring the car was not Mr Durlabh Patel and that its credit inquiries had been
fraudulently misdirected. I would hold that there was a hiring, and the impostor was
the hirer.
108 This conclusion involves a departure from Cundy v Lindsay 3 App Cas 459, a
decision of this House which has stood for more than 120 years. But its reasoning is
unsound. It is vitiated by its subjective approach to the formation of contract and the
necessary correlation between offer and acceptance; which may be why textbook
writers treat it as an example of unilateral mistake even though this was not the basis
on which it was decided. For the same reason it cannot be regarded as authoritative
on the question whether a contract otherwise properly entered into is void for mistake
rather than voidable. It has had an unfortunate influence on the development of the
law, leading to an unprincipled distinction between *961 face-to-face transactions
and others and the indefensible conclusion that an innocent purchaser's position
depends on the nature of the mistake of a third party or the precise mechanics of the
fraud which had been perpetrated on him. In my view it should now be discarded and
the law put on a simpler and more principled and defensible basis.
109 In my opinion only the decision in Cundy v Lindsay stands in the way of a
rational and coherent restatement of the law. My noble and learned friend, Lord
Phillips of Worth Matravers, has expressed the view that the conclusion to which Lord
Nicholls and I have come conflicts not only with that case but with the approach in
almost all the numerous cases which he has cited. If they had preceded Cundy v
Lindsay, that would be a strong reason for not adopting it. But they were merely
following a decision of this House by which they were bound. Far from applying it
generally, they attempted to distinguish it by carving out an unprincipled exception
from it which Lord Nicholls has shown cannot be supported. While departing from
Cundy v Lindsay would make obsolete the reasoning in those cases, dictated as it was
by that decision, it would undermine the actual decision in very few cases. There is no
long line of authority to be overruled. Indeed, only two cases need to be overruled;
and neither of them can be supported even on the view that Cundy v Lindsay was
rightly decided.
110 In my opinion Cundy v Lindsay 3 App Cas 459 should no longer be followed and
Ingram v Little [1961] 1 QB 31 and Hector v Lyons 58 P & CR 156 should be
overruled. I would allow the appeal.
LORD PHILLIPS OF WORTH MATRAVERS
111 My Lords, this appeal is a variation on a theme that has bemused courts and
commentators alike for over 150 years. Two individuals conduct negotiations in which
all the terms necessary to constitute a binding contract are agreed. One of those
individuals has, however, been masquerading as a third party. Does a binding
contract result? Grappling with this problem in Fawcett v Star Car Sales Ltd [1960]
NZLR 406, 413, Gresson P remarked that "the difficulty in deciding whether a mistake
of identity prevents the formation of a concluded contract is a proper assessment of
the facts rather than the ascertainment of the law". The issues that arise in this case
require the facts to be set out with some particularity.
The facts
112 A rogue acquired, by dishonest means, the driving licence of a Mr Durlabh Patel,
who lived at 45 Mayflower Road in Leicester. Armed with this he went to the
showrooms of motor dealers in Leicester called Chris Varieva Ltd. There he introduced
himself to the sales manager, Mr Bailey, as Mr Durlabh Patel of 45 Mayflower Road.
He said that he wished to purchase a Mitsubishi Shogun motor car registration
number N319 NFP, which was on display in the showroom. Mr Bailey and the rogue
agreed a price of £22,250, subject to obtaining hire-purchase finance.
113 Mr Bailey produced a copy of the claimant ("Shogun")'s standard form of hirepurchase agreement. That form was designed to cater both for hire-purchase
agreements regulated by the Consumer Credit Act 1974 and non-regulated hirepurchase agreements. The proposed agreement in *962 relation to the Shogun car
fell into the latter category. The terms on the back of the form were introduced by
clause 1, which provided:
"In these terms the customer(s) named overleaf are called 'you' and the creditor 'we'
or 'us.' Our address is 116, Cockfosters Road, Barnet EN4 0DY. You are offering to
make a legal agreement by signing this document. We can reject your offer, or accept
it by signing it ourselves. We may choose not to sign if there has been a change in
your circumstances since you gave us or the supplier details, or for any other reason
in our discretion. There will then be no agreement. We will tell the supplier if this is
the case. You must then return to the supplier any goods he let you have in the
expectation that we would accept your offer. You will have to compensate the supplier
if you do not return the goods immediately or if you have not taken proper care of
them. You should recover from the supplier any deposit or goods given in partexchange (or their value). If we sign this document it will become legally binding at
once (even before we send you a signed copy), and you will then be regarded as
having been entitled to the provision and use of the goods, and bound by the terms of
this agreement, as from the date you signed. This is what you are offering by signing.
Once we have both signed, this will be a hire-purchase agreement. In it we agree to
lease and (if you comply with the terms of this agreement) permit you to buy, and
you agree to hire, the goods on the terms on this page and overleaf."
The form had a box for insertion of "customer details". Into this was entered the
name and address of Mr Durlabh Patel together with the number of his driving licence.
The rogue signed the form "D J Patel" with a signature which matched that on the
stolen driving licence, which he produced.
114 Mr Bailey telephoned Shogun's sales support centre and relayed to one of the
clerks there the details which the rogue had provided, and then faxed to them a copy
of Mr Patel's driving licence and the draft agreement. Shogun made a computer
search to check Mr Patel's name and address against the electoral register, then to
check whether any county court judgments or bankruptcy orders were registered
against him, then to check his credit rating with one or more credit reference
agencies. In the space of about five minutes they learned how long Mr Patel had lived
at his address, where he worked and how long he had worked there, his bank account
number and how long he had held the account, his date of birth and his driving
licence number. They also learned that he had no adverse credit references.
115 Shogun compared the signatures on the driving licence and the draft agreement
and concluded that they matched. They then phoned the dealer and told him that the
proposal was accepted. The form was signed on behalf of Shogun, but it is not clear
precisely when this was done. The rogue paid the dealer a deposit of 10% of the
purchase price, partly in cash and partly by cheque. It is not recorded whether this
purported to be Mr Patel's cheque, but it seems likely that this was the case. In any
event the cheque was in due course dishonoured. The dealer handed over the vehicle
to the rogue, with complete documentation.
116 The rogue then sold the vehicle to the defendant, Mr Hudson, for £17,000. Mr
Hudson bought the vehicle for himself, and not as a dealer. *963 He bought it in
good faith. The rogue has vanished without trace. Shogun contend that the vehicle
has at all times been their property and claim its return, or its value in lieu. Mr
Hudson claims that the rogue passed a good title to him, by reason of the provisions
of the Hire-Purchase Act 1964.
The Hire-Purchase Act 1964
117 It is a fundamental principle of the English law of sale of goods that a vendor
cannot convey to a purchaser a better title to a chattel than that which he enjoys
himself. There are however exceptions to this rule. One arises under section 27 of the
1964 Act, as substituted, which provides, so far as material:
"(1) This section applies where a motor vehicle has been bailed or (in Scotland) hired
under a hire-purchase agreement, or has been agreed to be sold under a conditional
sale agreement, and, before the property in the vehicle has become vested in the
debtor, he disposes of the vehicle to another person.
"(2) Where the disposition referred to in subsection (1) above is to a private
purchaser, and he is a purchaser of the motor vehicle in good faith without notice of
the hire-purchase or conditional sale agreement (the ' relevant agreement'), that
disposition shall have effect as if the creditor's title to the vehicle has been vested in
the debtor immediately before that disposition."
118 Section 29(4) defines the debtor as, for present purposes, the person to whom
the vehicle is bailed.
119 The critical issue in this case is whether a hire-purchase agreement was ever
concluded between Shogun and the rogue. If an agreement was concluded, then the
rogue was the "debtor" under section 27 of the 1964 Act and passed good title in the
vehicle to Mr Hudson. If no agreement was concluded, then the rogue stole the
vehicle by deception and passed no title to Mr Hudson.
"What's in a name?"
120 This area of the law has developed because of confusion about names and it may
be helpful at the outset to reflect on the nature of a name. Words in a language have
one or more ordinary meaning, which will be known to anyone who speaks that
language. Names are not those kind of words. A name is a word, or a series of words,
that is used to identify a specific individual. It can be described as a label. Whenever a
name is used, extrinsic evidence, or additional information, will be required in order to
identify the specific individual that the user of the name intends to identify by the
name--the person to whom he intends to attach the label. Almost all individuals have
two or more names which they use to identify themselves and where a name is
mentioned in a particular context, or a particular milieu, those who hear it may have
the additional information that they need to identify to whom the speaker is referring.
121 Where a name appears in a written document, the document itself may contain
additional information which will enable the reader to identify *964 the individual to
whom the writer intended to refer when he wrote the name.
122 Where a person introduces himself by name to someone, his intention will
normally be to tell that person the name that he uses to identify himself. This may
also assist that other person to identify him in the future. If a person introduces
himself by a false name, that may be because he does not wish to be identified in the
future. If a person introduces himself by the name of somebody else, that may be
because he wishes the person to whom he introduces himself to believe that he is that
other person.
Formation of contract
123 A contract is normally concluded when an offer made by one party ("the offeror")
is accepted by the party to whom the offer has been made ("the offeree"). Normally
the contract is only concluded when the acceptance is communicated by the offeree to
the offeror. A contract will not be concluded unless the parties are agreed as to its
material terms. There must be "consensus ad idem". Whether the parties have
reached agreement on the terms is not determined by evidence of the subjective
intention of each party. It is, in large measure, determined by making an objective
appraisal of the exchanges between the parties. If an offeree understands an offer in
accordance with its natural meaning and accepts it, the offeror cannot be heard to say
that he intended the words of his offer to have a different meaning. The contract
stands according to the natural meaning of the words used. There is one important
exception to this principle. If the offeree knows that the offeror does not intend the
terms of the offer to be those that the natural meaning of the words would suggest,
he cannot, by purporting to accept the offer, bind the offeror to a contract: Hartog v
Colin & Shields [1939] 3 All ER 566; Smith v Hughes (1871) LR 6 QB 597. Thus the
task of ascertaining whether the parties have reached agreement as to the terms of a
contract can involve quite a complex amalgam of the objective and the subjective and
involve the application of a principle that bears close comparison with the doctrine of
estoppel. Normally, however, the task involves no more than an objective analysis of
the words used by the parties. The object of the exercise is to determine what each
party intended, or must be deemed to have intended.
124 The task of ascertaining whether the parties have reached agreement as to the
terms of a contract largely overlaps with the task of ascertaining what it is that the
parties have agreed. The approach is the same. It requires the construction of the
words used by the parties in order to deduce the intention of the parties--see Chitty
on Contracts, 28th ed (1999), vol 1, p 604, paras 12-042, 12-043 and the cases there
cited. This is true, whether the contract is oral or in writing. The words used fall to be
construed having regard to the relevant background facts and extrinsic evidence may
be admitted to explain or interpret the words used. Equally, extrinsic evidence may be
necessary to identify the subject matter of the contract to which the words refer.
125 Just as the parties must be shown to have agreed on the terms of the contract,
so they must also be shown to have agreed the one with the other. If A makes an
offer to B, but C purports to accept it, there will be no contract. Equally, if A makes an
offer to B and B addresses his acceptance to *965 C there will be no contract. Where
there is an issue as to whether two persons have reached an agreement, the one with
the other, the courts have tended to adopt the same approach to resolving that issue
as they adopt when considering whether there has been agreement as to the terms of
the contract. The court asks the question whether each intended, or must be deemed
to have intended, to contract with the other. That approach gives rise to a problem
where one person is mistaken as to the identity of the person with whom he is
dealing, as the cases demonstrate. I propose at this point to consider those cases.
The decided cases
126 In Boulton v Jones 27 LJ Ex 117 the owner of a shop named Brocklehurst sold his
stock-in-trade and assigned his business to the plaintiff. The same day the plaintiff
received an order in writing, addressed to Brocklehurst, from the defendant. The
defendant had had previous dealings with Brocklehurst and proposed to set off
against the price a debt owed by Brocklehurst. The plaintiff supplied the goods and
the defendant consumed them. When the plaintiff sent an invoice the defendant
denied that he had concluded any contract with him. The court ruled that there was
no contract. Pollock CB said, at pp 118-119: "Now the rule of law is clear, that if you
propose to make a contract with A, then B cannot substitute himself for A without
your consent and to your disadvantage, securing to himself all the benefit of the
contract. " Martin B, at p 119, agreed, without the qualification "to your disadvantage
": "Where the facts prove that the defendant never meant to contract with A alone, B
can never force a contract upon him; he has dealt with A, and a contract with no one
else can be set up against him." Bramwell B explained his reasons in this way, at p
118:
"I do not lay it down that because a contract was made in one person's name another
person cannot sue upon it, except in cases of agency. But when any one makes a
contract in which the personality, so to speak, of the particular party contracted with
is important, for any reason, whether because it is to write a book or paint a picture,
or do any work of personal skill, or whether because there is a set-off due from that
party, no one else is at liberty to step in and maintain that he is the party contracted
with, that he has written the book or painted the picture, or supplied the goods; and
that he is entitled to sue, although, had the party really contracted with sued, the
defendant would have had the benefit of his personal skill, or of a set-off due from
him."
Channell B, at p 119, also seemed to consider that it was material that the defendant
had a set-off:
"The plaintiff is clearly not in a situation to sustain this action, for there was no
contract between himself and the defendant. The case is not one of principal and
agent; it was a contract made with B, who had transactions with the defendant and
owed him money, and upon which A seeks to sue."
127 This early case does not demonstrate the full application of the principles that I
have set out in relation to formation of contract, although *966 the result accords
with them. The focus was, however, on the intention of the defendant.
128 In Hardman v Booth 1 H & C 803 a fraud was perpetrated by one Edward Gandell
who, it seems, carried on business in two capacities: (1) as clerk of a well known firm,
Gandell & Co, of which his father was sole proprietor. There he had neither authority
to contract nor was held out as having such authority. (2) He had formed a
partnership with a man called Todd, which carried on business as Gandell & Todd. He
purported to conclude a contract to purchase cloth from the plaintiffs, holding himself
out as a member of Gandell & Co. The first instalment of the cloth was delivered to
the premises of Gandell & Co and the second instalment was collected by Edward
Gandell in a cart owned by Gandell & Co. Edward Gandell took the cloth to the
defendant and purported to pledge it to secure a loan to Gandell & Todd. The issue
was whether in these circumstances any contract was concluded between the
plaintiffs and Gandell & Todd, under which the property in the cloth passed to them.
The court held that no contract had been concluded.
129 Once again the court attached critical importance to the intention of the vendors.
Pollock CB summarised the position as follows, at pp 806-807:
"in this case I think it clear that there was no contract. Mr Hawkins [for the
defendant] contended that there was a contract personally with Edward Gandell, the
individual with whom the conversations took place. It is true that the words were
uttered by and to him, but the plaintiffs supposed that they were dealing with Gandell
& Co, the packers, to whom they sent the goods; the fact being that Edward Gandell
was not a member of that firm and had no authority to act as their agent. Therefore
at no period of time were there two consenting minds to the same agreement."
130 Martin B, at p 807, emphasised that he had no doubt that the plaintiffs believed
"that they were dealing with Gandell & Co". Channell B remarked, at p 808: "I do not
think there was a sale to Gandell & Todd ... for it is evident that the plaintiffs believed
that they were dealing with Gandell & Co ... " Wilde B's judgment was to similar
effect. Thus the court proceeded on the simple premise that there could not be a
contract between A and B if A did not intend to contract with B. The courts had not at
this time begun to apply an objective test to the question of whether an agreement
had been concluded between the parties.
131 In Cundy v Lindsay 3 App Cas 459 a dispute about title to goods reached the
House of Lords. A rogue called Blenkarn had a room at 37 Wood Street, Cheapside. A
well-known firm called W Blenkiron & Son carried on business at 123, Wood Street.
Blenkarn placed written orders for goods from 37 Wood Street with the plaintiffs. He
signed the orders in such a way that the signature appeared to be Blenkiron & Co.
The plaintiffs, who knew of Blenkiron & Son, though not the number at which they
carried on business in Wood Street, accepted the orders and despatched goods
addressed to "Messrs Blenkiron & Co, 37 Wood Street, Cheapside". Blenkarn sold
some of these goods to the defendants, against whom the plaintiffs claimed in
conversion.
132 *967 The House held that no contract had been concluded with Blenkarn and
that, accordingly, the property in the goods had remained vested in the plaintiffs.
Lord Cairns LC remarked, at pp 464-465, that the plaintiffs and Blenkarn never came
into contact personally and that everything that was done was done by writing. The
problem was the conclusion to be derived from the writing, as applied to the facts of
the case. He held that Blenkarn had deliberately led the plaintiffs to believe that they
were contracting with Blenkiron & Co, an existing firm. He asked:
"how is it possible to imagine that in that state of things any contract could have
arisen between the respondents [plaintiffs] and Blenkarn, the dishonest man? Of him
they knew nothing, and of him they never thought. With him they never intended to
deal. Their minds never, even for an instant of time, rested upon him, and as between
him and them there was no consensus of mind which could lead to any agreement or
any contract whatever."
Lord Hatherley said, at p 469:
"from beginning to end the respondents believed they were dealing with Blenkiron &
Co, they made out their invoices to Blenkiron & Co, they supposed they sold to
Blenkiron & Co, they never sold in any way to Alfred Blenkarn; and therefore Alfred
Blenkarn cannot, by so obtaining the goods, have by possibility made a good title to a
purchaser, as against the owners of the goods, who had never in any shape or way
parted with the property nor with anything more than the possession of it."
Lord Penzance said, at p 471:
"In the present case Alfred Blenkarn pretended that he was, and acted as if he was,
Blenkiron & Co with whom alone the vendors meant to deal. No contract was ever
intended with him, and the contract which was intended failed for want of another
party to it."
133 Here, once again, the focus was on the intention of the offeree. In deciding that
his intention was to contract with Blenkiron & Co, the House had regard to the fact
that the order was apparently signed "Blenkiron & Co" and to the fact that the
plaintiffs knew of a firm of that name and intended to deal with that firm. Thus
extrinsic evidence was admitted in addition to the wording of the order in order to
ascertain the intention of the plaintiffs.
134 In King's Norton Metal Co Ltd v Edridge, Merrett & Co Ltd 14 TLR 98 a rogue
named Wallis had notepaper printed in the name of Hallam & Co and, pretending to
be carrying on business in that name, ordered a ton of brass rivet wire from the
plaintiff manufacturers. The plaintiffs delivered the wire on credit and Wallis promptly
sold it to the defendants. The Court of Appeal held that a contract had been concluded
between the plaintiffs and Wallis, under which property in the goods had passed. The
short report records the reasoning of A L Smith LJ as follows, at p 99:
"The question was, With whom, upon this evidence, which was all one way, did the
plaintiffs contract to sell the goods? Clearly with the writer of the letters. If it could
have been shown that there was a separate entity *968 called Hallam & Co and
another entity called Wallis then the case might have come within the decision in
Cundy v Lindsay 3 App Cas 459. In his opinion there was a contract by the plaintiffs
with the person who wrote the letters, by which the property passed to him. There
was only one entity, trading it might be under an alias, and there was a contract by
which the property passed to him."
135 This case demonstrates that, if a person describes himself by a false name in
contractual dealings, this will not, of itself, prevent the conclusion of a contract by a
person who deals with him in that name. A L Smith LJ did not refer to "intention" in
his reported judgment. The result is, however, consistent with the approach to which
I have referred in relation to formation of contract. The plaintiffs intended to deal with
whoever was using the name of Hallam & Co Extrinsic evidence was needed to
identify who that was but, once Wallis was identified as the user of that name, the
party with whom the plaintiffs had contracted was established. They could not
demonstrate that their acceptance of the offer was intended for anyone other than
Wallis.
136 Phillips v Brooks Ltd [1919] 2 KB 243 is the first case that involved a face-to-face
transaction. A rogue called North entered the plaintiff's jewellery shop. He selected
some pearls and a ring and wrote out a cheque for the total price of £3,000. He
stated that he was Sir George Bullough and gave an address in St James's Square.
The plaintiff, who knew of the existence of Sir George Bullough, referred to a directory
and found that Sir George did, indeed, live at that address. He then permitted North
to take away the ring before the cheque was cleared. Horridge J held that a contract
was concluded between the plaintiff and North. At the outset of his judgment, at p
246, he set out his conclusion:
"I have carefully considered the evidence of the plaintiff, and have come to the
conclusion that, although he believed the person to whom he was handing the ring
was Sir George Bullough, he in fact contracted to sell and deliver it to the person who
came into his shop, and who was not Sir George Bullough, but a man of the name of
North, who obtained the sale and delivery by means of the false pretence that he was
Sir George Bullough. It is quite true the plaintiff in re-examination said he had no
intention of making any contract with any other person than Sir George Bullough; but
I think I have myself to decide what is the proper inference to draw where a verbal
contact is made and an article delivered to an individual describing himself as
somebody else."
137 In reaching his conclusion, Horridge J, at pp 246-247, applied the reasoning in
an American decision, Edmunds v Merchants' Despatch Transportation Co 135 Mass
283, 283-284:
"The following expressions used in the judgment of Morton CJ seem to me to fit the
facts in this case: 'The minds of the parties met and agreed upon all the terms of the
sale, the thing sold, the price and time of payment, the person selling and the person
buying. The fact that the seller was induced to sell by fraud of the buyer made the
sale voidable, but not void. He could not have supposed that he was selling to any
other person; his intention was to sell to the person present, and identified by sight
and *969 hearing; it does not defeat the sale because the buyer assumed a false
name or practised any other deceit to induce the vendor to sell.' "
138 Phillips v Brooks Ltd well illustrates the conundrum that the application of the
test of intention raises when terms are negotiated between two persons who are face
to face. It arises where the two persons, A and B, are not known to each other and
where A gives a name which is not his own. If B is unaware of the existence of a third
person who bears that name, there will be no problem. B will clearly intend to
contract with A, treating the name given by A simply as the label by which A identifies
himself. Equally A will know that B intends to contract with him. The problem arises
where B is aware of a third person, C, who bears the name falsely adopted by A. In
that situation it is B's intention to contract both with A and with C, for he does not
distinguish between the two. No sensible answer can be given to the question: does B
intend to contract with A or C? Nor can any sensible answer be given to the question:
does A believe that B intends to contract with him or with C?
139 Horridge J solved the conundrum by drawing an "inference" that the plaintiff
intended to contract with the rogue, who was present, and not with the individual
whose identity the rogue had assumed.
140 Lake v Simmons [1927] AC 487 involved a claim by a jeweller on a policy of
insurance. A fraudulent woman named Ellison induced him, in face-to-face dealings,
to part with possession of two necklaces by false pretences. She pretended that she
was the wife of a local gentleman called Van der Borgh, with whom she was living,
and that he wanted a necklace on approval as he was contemplating giving it to her.
She further pretended that a Commander Digby, who was engaged to her sister,
wanted the other necklace on approval. There was no such man. Miss Ellison disposed
of the necklaces. The issue was whether the underwriters were exempted from
liability under an exclusion in respect of "loss by theft or dishonesty committed by ...
any customer in respect of goods entrusted to" the customer (p 495). The House held
that they were not. Viscount Haldane, when considering whether the goods were
"entrusted" to Miss Ellison, applied the test of whether the face-to-face dealings
between her and the jeweller were capable of giving rise to a contract. He held, at pp
500-501, that they were not because of the mistake as to her identity:
"The latter was entirely deceived as to the identity of the person with whom he was
transacting. It was only on the footing and in the belief that she was Mrs Van der
Borgh that he was willing to deal with her at all. In circumstances such as these, I
think that there was no such consensus ad idem as, for example, Lord Cairns, in his
judgment in Cundy v Lindsay 3 App Cas 459, declared to be requisite for the
constitution of a contract. No doubt physically the woman entered the shop and
pretended to bargain in a particular capacity, but only on the footing of being a
different person from what she really was. There was never any contract which could
afterwards become voidable by reason of a false representation made in obtaining it,
because there was no contract at all, nothing excepting the result of a trick practised
on the jeweller."
141 Viscount Haldane was applying a test of intention, but in a manner which differs
from that adopted by Horridge J. Although he purported to *970 distinguish rather
than overrule Phillips v Brooks Ltd [1919] 2 KB 243, I find his approach to be
inconsistent with that decision. Devlin LJ, in Ingram v Little [1961] 1 QB 31, carefully
analysed the speeches in Lake v Simmons [1927] AC 487, and concluded that no
other member of the House adopted Viscount Haldane's approach. I agree with that
conclusion. The speeches of the other members of the House do not bear on the issue
before us.
142 In Ingram v Little a rogue, in the course of negotiating to buy a car from three
ladies, the plaintiffs, who were reluctant to take his cheque, stated that his name was
P G M Hutchinson and gave an address in Caterham. One of the vendors went to the
local post office and ascertained from the telephone directory that there was indeed a
Mr P G M Hutchinson, who lived at that address. The ladies parted with possession of
the car in exchange for a worthless cheque. The rogue sold the car to the defendant.
The situation was similar to that in Phillips v Brooks Ltd, and all members of the Court
of Appeal referred to that case. Sellers LJ doubted whether it was correctly decided.
He said, at p 51:
"It is not an authority to establish that where an offer or acceptance is addressed to a
person (although under a mistake as to his identity) who is present in person, then it
must in all circumstances be treated as if actually addressed to him."
143 Earlier he said, at p 50:
"Where two parties are negotiating together and there is no question of one or the
other purporting to act as agent for another, and an agreement is reached, the
normal and obvious conclusion would no doubt be that they are the contracting
parties. A contrary finding would not be justified unless very clear evidence demanded
it."
Relevant factors that might displace the presumption that the parties face-to-face
were the contracting parties were whether the party impersonated was known to the
other party and the importance attached to the identity of that person. The question
in each case should be solved by asking the question "how ought the promisee to
have interpreted the promise?" Sellers LJ accepted the judge's conclusion that, on the
facts of the case, the rogue knew that the offer was not made to him as he was, but
only to an existing person whom he represented himself to be. The offer was one
which was capable of being accepted only by the honest P G M Hutchinson and not by
the rogue.
144 Pearce LJ gave a judgment to similar effect. He said, at p 57, that it was clear
that, though difficult, it was not impossible to rebut the prima facie presumption that
the offer could be accepted by the person to whom it was physically addressed. Each
case had to be decided on its own facts. He observed, at pp 57-58, that:
"the nature of the proposed contract must have a strong bearing on the question of
whether the intention of the offeror (as understood by his offeree) was to make his
offer to some other particular identity rather than to the physical person to whom it
was orally offered."
He concluded that the judge was entitled to find that the identity of Mr Hutchinson
was significant and that it was with him that the vendors intended to deal.
145 *971 Devlin LJ gave a powerful dissenting judgment. He held that there were
two questions: (1) was a contract properly formed? If so, (2) was it void for mistake?
146 As to form, he said that there could be no doubt that this had to be settled by
inquiring with whom Miss Ingram intended to contract. That was a mixed question of
fact and law. There was a presumption that a person intended to contract with the
person to whom he was addressing the words of the contract. That presumption was
not conclusive, at least where the party addressed purported to be acting as an agent.
The presumption could not, however, be rebutted simply by showing that Miss Ingram
would not have contracted with the rogue unless she had thought that he was Mr
Hutchinson. There was nothing to rebut the presumption that she was addressing her
acceptance to the rogue, in law as well as in fact. There was offer and acceptance in
form. Turning to the question of mistake, Devlin LJ held that there could be no
question of the mistake as to identity rendering the contract void, for the identity of
the purchaser was immaterial, although his creditworthiness was not.
147 All three members of the court adopted the approach of identifying the intention
of Miss Ingram. The difference between them was as to the manner of application of
that approach where an agreement was negotiated face to face. The majority
considered that a sensible answer could be given to the question "with whom did Miss
Ingram intend to contract?" as a question of fact. Devlin LJ considered that this
question could only be answered by the application of a legal presumption, which
would not be rebutted where the only reason for interest in the identity of the
contracting party was concern that the contracting party should be creditworthy.
148 Ten years later a case of very similar facts was before the Court of Appeal. In
Lewis v Averay [1972] 1 QB 198 the plaintiff advertised his car for sale in a
newspaper. A rogue telephoned and asked to see it. He arrived and told the plaintiff
and his fiancée that he was Richard Green and led them to believe that he was a wellknown film actor of that name, who was playing the role of Robin Hood in a television
series. A sale was agreed and the rogue wrote out a cheque for the purchase price.
The plaintiff demurred at letting the rogue take the car before his cheque was cleared,
whereupon the rogue produced a pass of admission to Pinewood Studios, with an
official stamp on it, the name Richard A Green and the rogue's photograph. On sight
of this, the plaintiff permitted the rogue to take the car and the documents that
related to it. The cheque bounced and the rogue sold the car to the defendant,
pretending at this point that he had the plaintiff's name. The Court of Appeal held that
a valid contract had been concluded between the plaintiff and the rogue and that good
title had passed to the defendant.
149 Giving the leading judgment, Lord Denning MR commented that it was impossible
to distinguish between Phillips v Brooks Ltd [1919] 2 KB 243 and Ingram v Little
[1961] 1 QB 31 on the facts. He held that Phillips v Brooks Ltd was to be preferred.
He said, at p 207:
"When two parties have come to a contract--or rather what appears, on the face of it,
to be a contract--the fact that one party is mistaken as to the identity of the other
does not mean that there is no contract, or that the contract is a nullity and void from
the beginning. It only means that the contract is voidable, that is, liable to be set
aside at the instance of the *972 mistaken person, so long as he does so before third
parties have in good faith acquired rights under it ... In this case Mr Lewis made a
contract of sale with the very man, the rogue, who came to the flat. I say that he '
made a contract' because in this regard we do not look into his intentions, or into his
mind to know what he was thinking or into the mind of the rogue. We look to the
outward appearances. On the face of the dealing, Mr Lewis made a contract under
which he sold the car to the rogue, delivered the car and the logbook to him, and took
a cheque in return. The contract is evidenced by the receipts which were signed. It
was, of course, induced by fraud. The rogue made false representations as to his
identity. But it was still a contract, though voidable for fraud. It was a contract under
which this property passed to the rogue, and in due course passed from the rogue to
Mr Averay, before the contract was avoided."
150 Phillimore LJ agreed, though in a manner which paid due respect to the doctrine
of precedent. He referred, at p 208, to the fact that Ingram v Little was a case of
"very special and unusual facts" and held that there was nothing that could displace
the prima facie presumption that the plaintiff was dealing with the rogue. The case
was on all fours with Phillips v Brooks Ltd, which had been good law for 50 years.
151 Megaw LJ concurred, observing that he found it difficult to understand the basis,
either in logic or in practical considerations, of the test laid down in Ingram v Little.
152 Lord Denning MR did not apply the approach of attempting to identify the
intention of the plaintiff. He proceeded on the simple basis that, to all outward
appearances, the plaintiff entered into an agreement with the rogue, with whom he
was dealing. Both he and Phillimore LJ considered that the case was on all fours with
Phillips v Brooks Ltd, which had been rightly decided.
153 The difficulty in applying a test of intention to the identification of the parties to a
contract arises, so it seems to me, only where the parties conduct their dealings in
some form of inter-personal contact, and where one purports to have the identity of a
third party. There 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.
154 The same problem will not normally arise where the dealings are carried out
exclusively in writing. The process of construction of the written instruments, making
appropriate use of extrinsic evidence, will normally enable the court to reach a firm
conclusion as to the person with whom a party intends to contract. This was the
position in Boulton v Jones 27 LJ Ex 117, Cundy v Lindsay 3 App Cas 459 and King's
Norton Metal Co Ltd v Edridge, Merrett & Co Ltd 14 TLR 98. There is a substantial
body of authority that demonstrates that the identity of a party to a contract in
writing falls to be determined by a process of construction of the putative contract
itself. I shall refer to some examples.
155 In Young v Schuler 11 QBD 651 the issue was whether Schuler had signed an
agreement simply under a power of attorney on behalf of one of the named parties or,
additionally, on his own behalf as a guarantor. As to this, Sir William Brett MR
observed, at pp 654-655: *973
"But the questions whether a person has signed his name at the foot of a document,
and if so, for what purpose, are questions of evidence, and any evidence on the
subject which does not contradict the document is admissible ... This evidence does
not contradict anything on the face of the document, and is, in my opinion, clearly
admissible." (My emphasis.)
Cotton LJ gave a judgment to like effect and Bowen LJ agreed.
156 In Newborne v Sensolid (Great Britain) Ltd [1954] 1 QB 45 an apparent contract
in writing provided for the sale of goods by a company described as Leopold
Newborne (London) Ltd The document was subscribed by the name of the company
with Mr Leopold Newborne's signature under it. At the time in question Leopold
Newborne (London) Ltd did not exist, for it had not then been incorporated. Mr
Newborne attempted to enforce the contract as one to which he was party. He failed
on the ground that this was inconsistent with the description of the party in the
contract. Lord Goddard CJ observed, at p 51:
"In my opinion, unfortunate though it may be, as the company was not in existence
when the contract was signed there never was a contract, and Mr Newborne cannot
come forward and say: 'Well, it was my contract.' The fact is, he made a contract for
a company which did not exist."
157 Morris LJ agreed, observing, at pp 51-52, that the contract purported to be a
contract with the company and that it was not relevant that, as was the case, it was a
matter of indifference to the purchasers whether they contracted with the company,
or with Mr Newborne personally.
158 Where contracts were subject to the Statute of Frauds the required
memorandum in writing had to identify the parties to the contract and a person could
not intervene to claim that he was the true party to the contract when this was not
consistent with the terms of the memorandum: Lovesy v Palmer [1916] 2 Ch 233;
Basma v Weekes [1950] AC 441.
159 In the field of agency, an undisclosed principal will not be permitted to claim to
be party to a contract if this is contrary to the terms of the contract itself. Thus the
provision in the standard form B contract of the London Metal Exchange "this contract
is made between ourselves and yourselves as principals, we alone being liable to you
for its performance" is effective to preclude any contention that the parties named in
the contract are contracting as agents for others: J H Rayner (Mincing Lane) Ltd v
Department of Trade and Industry [1990] 2 AC 418, 516.
160 In the field of shipping law a question sometimes arises as to who is the party to
a contract of carriage and this is determined as a question of construction: see
Homburg Houtimport BV v Agrosin Private Ltd [2004] 1 AC 715 and Internaut
Shipping GmbH v Fercometal SARL [2003] 2 Lloyd's Rep 430 for recent examples.
161 The effect of these authorities is that a person carrying on negotiations in writing
can, by describing as one of the parties to the putative agreement an individual who
is unequivocally identifiable from that description, preclude any finding that the party
to the putative agreement is other than the person so described. The process of
construction will lead inexorably to the conclusion that the person with whom the
other party intended to contract was the person thus described.
162 *974 That the identification of the parties to a written contract involves
construing the contract was the basis of the decision in Hector v Lyons 58 P & CR 156.
The majority of the Court of Appeal in the present case considered that this decision
weighed conclusively in favour of Shogun. Hector v Lyons involved a claim for specific
performance of a contract to buy a house. The plaintiff ("the father") rejoiced in the
name Martin Aloysius Handel Hector. He had a son, aged less than 18, more modestly
christened Martin Aloysius Hector. The father negotiated the purchase of the house
face to face with the defendant, who at all times understood that she was contracting
with the father. The father instructed solicitors to draw up the formal contract for
exchange. For reasons not apparent he led them to understand that the purchaser
was to be his son, and they described the purchaser in the contract as "Martin
Aloysius Hector", understanding that they were thereby identifying the son. The father
signed the purchaser's copy of the contract with a signature that differed from his
normal signature. What was behind all of this is not clear to me nor was it, I suspect,
to the trial judge, who found that the father gave a lot of false evidence.
163 The father sought to enforce the contract on the footing that he was the
purchaser. The defendant argued that he was not a party to the written contract; the
purchaser under that contract was the son. The trial judge found in her favour. The
basis upon which he did so was that the solicitors handed over the purchaser's part of
the contract as being the document of the son and the signature that it bore
purported to be that of the son.
164 In the Court of Appeal counsel for the father argued that the contract had been
concluded between the father and the defendant, relying on the line of cases ending
with Lewis v Averay [1972] 1 QB 198. Sir Nicolas Browne-Wilkinson V-C dismissed
this argument, at pp 158-159:
"In the case of a face-to-face sale, where the sale is over a counter or between two
individuals, the law is well established that the mere fact that the vendor V is under a
misapprehension as to the identity of the person in front of him does not operate so
as to render the contract void for mistake, it being a mere unilateral mistake as to a
quality of the purchaser; only in cases where the identity of the purchaser is of direct
and important materiality in inducing the vendor to enter into the contract is a
mistake of the kind capable of avoiding the contract. With one exception those cases
are entirely concerned with transactions between two individuals face to face entering
into oral agreement. In my judgement the principle there enunciated has no
application to a case such as the present where there is a contract and wholly in
writing. There the identity of the vendor and the purchaser is established by the
names of the parties included in the written contract. Once those names are there in
the contract, the only question for the court is to identify who they are. In the present
case the deputy judge has found as a fact that the party named in the written
contract was Mr Hector junior. It follows, in my judgment, that in the absence of
rectification, which has not been claimed, or Mr Cogley's alternative argument [for the
father] based on agency the only person who can enforce that contract is the party to
it, namely Mr Hector junior. He has never at any stage sought to do so. It is for these
purposes in my judgment irrelevant whom [the defendant] Mrs Lyons thought she
was contracting with: she is entitled to say *975 'I entered into a contract with the
person named in the contract, and nobody else.' As the deputy judge pointed out, if
Mrs Lyons had sought to enforce the contract against Mr Hector senior, the position
might have been different, in that Mr Hector senior might have estopped himself by
his conduct from denying that he was the person named in the contract. But that is
quite a different case."
165 In concurring with the Vice-Chancellor, Woolf LJ said, at pp 160-161:
"Parties to the contract are normally to be ascertained from the document or
documents containing the contract. There can be limited circumstances where it is
possible to allow oral evidence to be given in relation to a written contract, but those
circumstances are recognised as being exceptional and should, in my view, be strictly
confined ... In this case there is no dispute as to who, according to the written
contract, are the parties. The son was described in the contract as one of the parties.
He does exist and, in so far as there was a contract at all, it was between him and the
other party identified in the contract, Mrs Pamela Doris Lyons."
166 Given the premise that, as a matter of construction, the purchaser described in
the contract was the son, the conclusion of the Court of Appeal is readily
understandable. I do, however, have difficulty in understanding the basis on which
the trial judge concluded that the purchaser described in the contract was the son
rather than the father. The father had carried out the negotiations, he had signed the
agreement, albeit not with his customary signature, and he bore the forenames and
the surname of the purchaser, as described in the contract. The trial judge's finding
does not, however, appear to have been challenged in the Court of Appeal. While the
facts of this decision are not easy to follow, it supports the proposition that the
identity of the parties to a contract in writing fall to be determined by a process of
construction of the contract.
The result in the present case
167 I have had the advantage of reading in draft the opinions of my noble and
learned friends who have sat with me on this appeal. Lord Hobhouse of Woodborough
and Lord Walker of Gestingthorpe have concluded that, as the contract was a written
document, the identity of the hirer falls to be ascertained by construing that
document. Adopting that approach, the hirer was, or more accurately purported to be,
Mr Patel. As he had not authorised the conclusion of the contract, it was void.
168 Lord Nicholls of Birkenhead and Lord Millett have adopted a different approach.
They point out the illogicality of applying a special approach to face-to-face dealings.
What of dealings on the telephone, or by videolink? There also it could be said that
each of the parties to the dealings is seeking to make a contract with the other party
to the dealings. And this can even be said when the dealings are conducted by
correspondence. If A writes to B making an offer and B writes back responding to that
offer, B is intending to contract with the person who made that offer. If a contract is
concluded in face-to-face dealings, notwithstanding that one party is *976
masquerading as a third party, why should the result be different when the dealings
are by letter?
169 Lord Nicholls of Birkenhead and Lord Millett propose an elegant solution to this
illogicality. Where two individuals deal with each other, by whatever medium, and
agree terms of a contract, then a contract will be concluded between them,
notwithstanding that one has deceived the other into thinking that he has the identity
of a third party. In such a situation the contract will be voidable but not void. While
they accept that this approach cannot be reconciled with Cundy v Lindsay 3 App Cas
459, they conclude that Cundy v Lindsay was wrongly decided and should no longer
be followed.
170 While I was strongly attracted to this solution, I have found myself unable to
adopt it. Cundy v Lindsay exemplifies the application by English law of the same
approach to identifying the parties as is applied to identifying the terms of the
contract. In essence this focuses on deducing the intention of the parties from their
words and conduct. Where there is some form of personal contact between individuals
who are conducting negotiations, this approach gives rise to problems. In such a
situation I would favour the application of a strong presumption that each intends to
contract with the other, with whom he is dealing. Where, however, the dealings are
exclusively conducted in writing, there is no scope or need for such a presumption.
This can be illustrated by a slight adaption of the facts of the present case. Assume
that the rogue had himself filled in the application form and sent it and a photocopy of
Mr Patel's driving licence to Shogun. Assume further that he had been authorised to
do so by Mr Patel. There can be no doubt that a contract would have been concluded
between Shogun and Mr Patel. Mr Patel would have intended to contract with Shogun;
Shogun would have intended to contract with Mr Patel; and this would have been
demonstrated by the application form.
171 Assume now that the rogue had wrongly understood that he had been requested
by Mr Patel to fill in and submit the application form on his behalf, but in fact had no
authority to do so. In this situation, according to established principles of the law of
agency, an apparent contract would have been concluded between Shogun and Mr
Patel but, being concluded without the latter's authority, it would be a nullity. Shogun
might have a claim against the rogue for breach of warranty of authority, but could
not have demonstrated that a contract had been concluded with the rogue.
172 Turning to the true position--that the rogue knew he had no authority to
conclude a contract in the name of Mr Patel, but fraudulently wished to induce Shogun
to believe that they were entering into such a contract--I do not see by what legal
principle this change in the mental attitude of the rogue could result in a binding
contract being concluded with him.
173 The position is not, of course, as simple as that. Negotiations between the rogue
and Shogun were not conducted exclusively by written correspondence. They were
conducted with the aid of the dealer and the use of fax and telephone
communications. Acceptance of the offer was conveyed by telephone via the dealer-and this might have been capable of concluding a contract, notwithstanding that
clause 1 of the standard terms provided for acceptance by signature: see the
discussion in Chitty on Contracts, 28th ed, vol 1, p 117, para 2-062. Sedley LJ
considered that the *977 dealings were analogous to face-to-face dealings and that
the dealer was, in effect, the face of Shogun Finance Ltd. He considered that the faceto-face presumption should be applied.
174 The majority of the Court of Appeal considered that Hector v Lyons 58 P & CR
156 required them to determine the identity of the parties to the putative contract as
a simple question of construction. On that basis they concluded that the putative hirer
was Mr Patel and that, as the apparent contract was concluded without his authority,
it was a nullity.
175 Dyson LJ considered what the result would have been had the negotiations been
treated as face-to-face. He concluded [2002] QB 834, 853-854, paras 45- 46 that the
presumption would have been displaced by the importance that Shogun attached to
the identity of the person with whom they were contracting.
176 My Lords, I started this opinion by quoting Gresson P's remark (Fawcett v Star
Car Sales Ltd [1960] NZLR 406, 413 that the difficulty in a case such as this is a
proper assessment of the facts rather than an assessment of the law. I have not
found the assessment of the law easy, but nor is the application of the law to the
facts. Shogun's representatives were aware of the presence of the prospective hirer in
the dealer's showrooms in Leicester. To an extent the dealings were interpersonal
through the medium of the dealer. Should one treat them as comparable to face-toface dealings and conclude that there was a presumption that Shogun intended to
contract with the man with whom they were dealing? Should one treat the written
agreement as no more than peripheral to the dealings and conclude that it does not
override that presumption? I have concluded that the answer to these questions is
"no".
177 Shogun had, on the evidence, set up a formal system under which contracts
would be concluded in writing on a standard form. This form was designed to cater for
both regulated and non-regulated hire-purchase agreements. In order to be suitable
for the former it had to comply with the requirements of the Consumer Credit
(Agreements) Regulations 1983 (SI 1983/1553). Schedule 1 to these Regulations,
under the heading "Parties to agreement", requires the agreement to set out "The
name and a postal address of the creditor" and "The name and a postal address of the
debtor". The agreement with which this appeal is concerned was not a regulated
agreement, for the purchase price of the vehicle exceeded what was, at the time, the
maximum to which the relevant provisions of the 1974 Act applied. I do not see,
however, that the approach to the identification of the parties to the putative
agreement can turn on whether or not the agreement was subject to the Regulations.
Shogun put in place a system for concluding contracts that required both regulated
and unregulated agreements to be entered into in writing in a form which provided
essential information, including the identity of the parties to the agreement.
178 These considerations lead me to conclude that the correct approach in the
present case is to treat the agreement as one concluded in writing and to approach
the identification of the parties to that agreement as turning upon its construction.
The particulars given in the agreement are only capable of applying to Mr Patel. It
was the intention of the rogue that they should identify Mr Patel as the hirer. The
hirer was so identified by Shogun. Before deciding to enter into the agreement they
checked that Mr Patel existed and that he was worthy of credit. On that basis they
decided to *978 contract with him and with no one else. Mr Patel was the hirer under
the agreement. As the agreement was concluded without his authority, it was a
nullity. The rogue took no title under it and was in no position to convey any title to
Mr Hudson.
179 For these reasons I would dismiss this appeal.
LORD WALKER OF GESTINGTHORPE
180 My Lords, I have had the advantage of reading in draft the opinion of my noble
and learned friend, Lord Hobhouse of Woodborough. I agree with him that this appeal
should be dismissed for the reasons given in his opinion. But because of the interest
of this appeal, and the differing views among your Lordships, I wish to add some
observations of my own. I begin with two general points.
181 A recurring theme in the authorities, starting with the very first sentence of the
speech of Lord Cairns LC in Cundy v Lindsay 3 App Cas 459, 463, is the court's
difficulty in deciding which of two innocent parties should bear the loss caused by the
fraud of a third person (who may be beyond the reach of the law). Typically one
innocent party is a seller who has parted with goods to a rogue, without obtaining
payment in cash, and the other innocent party has bought the same goods from the
rogue for cash. But although the court recognises both as innocent there is sometimes
an inclination to regard the eventual buyer from the rogue as the more deserving of
sympathy. Thus Lord Denning MR said in Lewis v Averay [1972] 1 QB 198, 207:
"As I listened to the argument in this case, I felt it wrong that an innocent purchaser
(who knew nothing of what passed between the seller and the rogue) should have his
title depend on such refinements. After all, he has acted with complete circumspection
and in entire good faith: whereas it was the seller who let the rogue have the goods
and thus enabled him to commit the fraud."
182 In that case both of the innocent parties were young men and both might be
thought to have been over-trusting. By contrast in Phillips v Brooks Ltd [1919] 2 KB
243, the seller was an Oxford Street jeweller, and the ultimate holder was a
pawnbroker, both of whom were presumably experienced in their trades. In other
cases one or other of the innocent parties may appear to have a stronger claim on the
court's sympathy. But your Lordships have to lay down a general rule to cover the
generality of cases, and it would not be right to make any general assumption as to
one innocent party being more deserving than the other. That is especially true in this
case which is concerned, not with a sale but with a hire-purchase transaction, and in
which the issue to be decided is (as Lord Hobhouse has pointed out) ultimately a
question of statutory construction.
183 The other general point is that (in agreement, I think, with all your Lordships) I
regard the issue in this appeal as essentially a problem about offer and acceptance;
and in determining whether or not a contract has been formed by offer and
acceptance, the court adopts an objective approach, and does not inquire into what
either party actually intended, but into the effect, objectively assessed, of what they
said or wrote. As it has been put in a much-cited passage from Gloag on Contract,
2nd ed (1929), p 7: "The judicial task is not to discover the actual intentions of each
party; it is to *979 decide what each was reasonably entitled to conclude from the
attitude of the other. " (For one of the most recent citations see OT Africa Line Ltd v
Vickers plc [1996] 1 Lloyd's Rep 700, 702.) This point is neither original nor
controversial but it is worth making because in the leading case of Cundy v Lindsay
(which had at first instance been tried with a jury) their Lordships' speeches placed
little or no weight on the need for an objective approach. There was no need for them
to do so, since, as the Lord Chancellor said, at p 464: "the whole history of the whole
transaction lies upon paper."
184 The objective nature of the inquiry tends to narrow, perhaps close to vanishingpoint, the difference (mentioned in the speeches of my noble and learned friends Lord
Millett and Lord Phillips of Worth Matravers) between the person for whom the offer or
acceptance is intended and the person to whom it is directed. I venture to suggest
that the right question to ask, whether the parties to an alleged contract have been
negotiating face to face or at a distance, is to whom the offer is made (or to whom
acceptance of an offer is made; but I shall for the sake of simplicity assume that, as
in this case, the rogue is the offeror). Posed in that way, the question may be no
easier to answer, but it does avoid the sort of pointless speculation which Devlin LJ
exposed in Ingram v Little [1961] 1 QB 31, 65:
"If Miss Ingram had been asked whether she intended to contract with the man in the
room or with P G M Hutchinson, the question could have no meaning for her, since
she believed them both to be one and the same. The reasonable man of the law--if he
stood in Miss Ingram's shoes--could not give any better answer."
185 The principle to be applied in the case of face-to-face negotiations has
sometimes been treated as an exception, but to my mind it is the best starting-point,
as it exemplifies the simplest form of oral contract. The principle was first spelled out
in England in Phillips v Brooks Ltd [1919] 2 KB 243, 247, following the Chief Justice of
Massachusetts (Morton CJ) in Edmunds v Merchants' Despatch Transportation Co 135
Mass 283, 283-284:
"The fact that the seller was induced to sell by fraud of the buyer made the sale
voidable, but not void. He could not have supposed that he was selling to any other
person; his intention was to sell to the person present, and identified by sight and
hearing; it does not defeat the sale because the buyer assumed a false name or
practised any other deceit to induce the vendor to sell."
The only case out of line with the principle is Ingram v Little. The reasoning in Devlin
LJ's powerful dissenting judgment is in my view unanswerable. I consider that Ingram
v Little was wrongly decided.
186 My noble and learned friends, Lord Nicholls of Birkenhead and Lord Millett, accept
the face-to-face principle but consider that it should not be limited to situations where
the parties have negotiated face-to-face. Lord Millett also takes the view that the
principle should not be regarded as a mere presumption, but as a rule of law (subject,
as I understand it, to an exception in cases of agency, such as Hardman v Booth 1 H
& C 803, which may be the best explanation of the difficult case of Lake v Simmons
[1927] AC 487: *980 see Sir Jack Beatson's 28th edition of Anson's Law of Contract
pp 330- 331, which contain an illuminating discussion).
187 If the principle is no more than a presumption, it is a strong presumption, and
exceptions to it would be rare (in Ingram v Little Devlin LJ himself, at p 67, was
content to leave this point open). I would hesitate to state it as an inflexible rule
(apart from cases of agency) because the notion of one individual impersonating
another covers a wide range of factual situations (broadly corresponding to the wide
range of meaning conveyed by saying that one person knows, or knows of, another).
At one end of the spectrum is the confidence trickster who falsely but convincingly
asserts that he is a baronet (or a barrister, or a brain surgeon) in order to inspire
confidence and obtain credit. Then there are cases like Phillips v Brooks Ltd [1919] 2
KB 243 and Ingram v Little [1961] 1 QB 31, where the rogue falsely gives the name
and address of a real person whose existence the other party can and does check (but
whom the other party does not actually know by sight, or the deception would fail).
The most audacious form of impersonation would be where a rogue (such as the
Tichborne claimant was held to be) attempts, face-to-face, to deceive a member of
the family of which he claims to be part, or someone else personally acquainted with
the individual whom the rogue is impersonating. Impersonation of that sort must be
very rare indeed, and probably limited to deception of those whose senses are
impaired (as Isaac was when, according to chapter 27 of Genesis, Jacob successfully
impersonated his elder twin brother Esau). I would not exclude the possibility that
impersonation of that sort might be outside the presumption. Your Lordships were
shown the decision of the Court of Appeals of New York in Morgan Munitions Supply
Co Inc v Studebaker Corpn of America (1919) 123 NE 146, where one brother
impersonated his more distinguished brother in order to obtain a contract of
employment; but it appears (so far as can be discerned from the report) that the
contract was in writing, and that neither brother was personally known to the
employer.
188 I return to the question, which is of central importance to this appeal, whether
(as Lord Nicholls and Lord Millett propose) the face-to-face principle should be applied
much more generally. It may be that it should apply to an oral contract alleged to
have been made on the telephone, where the parties are identified by hearing,
although not by sight. An alleged oral contract made by telephone might be a case
where the presumption applied, but was rebuttable. But to extend the principle to
cases where the only contract was by written communication sent by post or by email would be going far beyond identification by sight and hearing. Where there is an
alleged contract reached by correspondence, offer and acceptance must be found, if
they are to be found at all, in the terms of the documents. Devlin LJ put it simply and
clearly in Ingram v Little [1961] 1 QB 31, 64:
"The classic case of Cundy v Lindsay 3 App Cas 459 was one in which the acceptance
was not addressed to the offeror. The offer, as in the instant case, was addressed to a
person who held himself out as willing to do business. But the offer was made by
Blenkarn and the acceptance addressed to Blenkiron. The fact that there was a real
Blenkiron, whom Blenkarn was pretending to be, showed that it was not a case of
falsa demonstratio non nocet."
*981 There was in that case the appearance of a complete contract only because the
rogue, Blenkarn, had forged the signature of Blenkiron & Co (Lord Cairns LC said, at p
465, "just in the same way as if he had forged the signature"; but the facts as set out
in the report appear to amount to nothing less than forgery). The documentary
evidence provided no ground for concluding that the manufacturer (Lindsay & Co)
intended to contract with anyone other than Blenkiron & Co as addressee of the
manufacturer's acceptance.
189 King's Norton Metal Co Ltd v Edridge, Merrett & Co Ltd 14 TLR 98 went the other
way because there was no ground for concluding that the manufacturer's offer was
made to anyone other than Wallis, trading as Hallam & Co Wallis, trading as Hallam &
Co, had previously placed at least one order with the manufacturer, and had paid with
a cheque drawn by "Hallam & Co". The judge at first instance described the case as a
long firm fraud. So in that case there was no question of the manufacturer being
deceived into thinking he was dealing with someone else. The deceit was as to the
standing and creditworthiness of Wallis, who had embellished his writing paper with
deceptive material.
190 In Cundy v Lindsay 3 App Cas 459 Blenkiron & Co, the firm whose name was
misappropriated by the rogue, was described by the Lord Chancellor, at p 465, as "a
well known and solvent house". The implication is that Lindsay & Co, the
manufacturer, would have known of its existence, although that was not a question
explicitly put to the jury. What if Lindsay & Co had never heard of Blenkiron & Co?
One answer to that question is that the sequence of events would probably have been
different, since Lindsay & Co would have been put on inquiry as to what to make of
the rogue's deceptive signature, and would probably have acted more cautiously
before despatching such a large quantity of goods. There would have been more room
for argument about who was the real addressee of the manufacturer's offer. The Latin
maxim referred to by Devlin LJ in Ingram v Little means in its full form that
misdescription is not fatal when the real subject-matter is common ground. These last
words are important. Whether the real subject is common ground depends on all the
circumstances, and the old textbooks are full of illustrations, some going one way and
some the other: see for instance Jarman on Wills, 8th ed (1951), vol 2, pp 1246ff.
The modern approach to construction of documents is much less regimented by
detailed rules, but the essential issue remains the same.
191 However, the present appeal is, as my noble and learned friend, Lord Hobhouse,
has demonstrated, easier to resolve. Shogun Finance had no doubt never heard of the
real Mr Patel before the day on which the written contract was signed by the rogue,
forging Mr Patel's signature. But by the time it accepted the written offer it had, by
efficient information technology, confirmed that Mr Patel existed and had learned a
good deal of relevant information about him, including his creditworthiness. The form
of contract made quite clear that Shogun Finance's intention was to accept an offer
made by the real Mr Patel, and no one else. The appellant's attempt to analyse the
matter as a face-to-face contract (effected through the agency of the car salesman)
was accepted by Sedley LJ but in my view it must fail, for the reasons stated by Lord
Hobhouse. The defendant relied on the decision of this House in Branwhite v
Worcester Works Finance Ltd [1969] 1 AC 552, *982 but in my view it is against him:
see especially the remarks of Lord Upjohn, at p 578.
192 In the course of argument some time was spent on the decision of the Court of
Appeal in Hector v Lyons 58 P & CR 156. In that case a man was negotiating to buy a
house and had discussions, both on the telephone and face-to-face, with the seller.
He then instructed solicitors to act on the basis that his son (who was under full age
and shared three of his father's four names) was to be the purchaser of the house,
and the solicitors apparently agreed to proceed on that basis. The father signed the
contract, although not with his normal signature. The Court of Appeal upheld the
deputy judge's refusal of the father's claim for specific performance. That result can
readily be supported, if only on the "clean hands" principle. But the reasoning in the
case is difficult, very largely because the facts are not only unusual but also obscure.
The father gave evidence most of which was rejected as false, and the solicitors
instructed by the father did not give evidence. But I am of the clear opinion that the
decision does not assist the defendant in this case. So far as material, it confirms that
the principle as to face-to-face negotiations does not apply to a written contract
identifying the parties (as was requisite in a contract for the sale of land both before
and after the coming into force of the Law of Property (Miscellaneous Provisions) Act
1989).
193 For these reasons, and for the fuller reasons given by Lord Hobhouse, I would
dismiss this appeal.
Appeal dismissed with costs.
Representation
Solicitors: Bird Wilford & Sale, Loughborough; Sechiari Clark & Mitchell, Barnet.
MG
(c) Incorporated Council of Law Reporting For England & Wales
[2004] 1 A.C. 919
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