The aim of this paper is to identify the overlapping areas of common mistake in common law and common mistake in equity which has led to confusion and propose if possible theories of solutions that will shed some clarity towards ensuring a unified single system of law. The categories of common mistake in common law are based on an obstructive elucidation of mistakes which can be classified as an essential component of a contract for this purpose. A mistake is defined as a factual misunderstanding that may inadvertently lead to a failure in contracting between two or more people thus resulting in the said contract being void.
1
Common law has since identified three varying types of mistakes in contract law with the first being Unilateral mistake, Mutual mistake and finally Common mistake. In this essence, mistakes in nullifying an agreement or ‘Common Mistake’ 2
is described as an oversight in which condenses a contract profoundly dissimilar from that which both parties originally thought they were assenting to and thus cause the contract to be declared null and void for the parties have without comprehension made a contract on something which has ceased to exist at the time the contract is made. There are three categories under common mistake, each with a subtle yet succinct difference with its counterparts. In the event of a subject matter that is deemed to have existed at one point but no longer continue to do so at the time of the contract is known by its Latin connotation as Res Extincta.
An example of this is show in the case of
Galloway v Galloway (1914) 30 TRL 531 3 in which both parties were under the assumption that they were married to each other, made a separation agreement. It was later discovered that the marriage was invalid on the grounds that the husband’s previous wife was alive and that the earlier marriage has not been nulled. As such, the separation agreement had no hold over the current marriage and the husband had no liability under the contract.
1 Mc Kendrick E “Contract Law: Text, Cases & Materials”, 4th Edition, Oxford 2010
2 ibid 1.
3 Poole J, Casebook on Contract Law (10th Edition, Oxford University Press, 2010)

Furthermore, in the case of Associated Japanese Bank (International) Ltd v Credit du
Nord 4 in which a sale and lease back transaction occurred between the plaintiff’s bank and four machines purchased from Bennett. The defendant received over one million pounds under the transaction and as a condition, Bennett’s obligation under the lease were accounted for by the defendant’s bank. Both banks believed that the four machines existed. After
Bennett was declared bankrupt for failing to keep up with payments, the plaintiff sought to enforce the guarantee against the defendant. However the defendant raised common law mistake and cited the contract void as to the existence of the machines. The court held that on its construe the guarantee was subjected to a precedent condition being that that there was a lease in respect of four existing machines and since the machines in question did not exist, the plaintiff’s banks claims failed.
In the context of sales of perishable goods, it is important to know that distinction is given to the interpretation of the word ‘perished’. In
Couturier v Hastie (1856) 5 HL 673 , a cargo of corn shipments was shipped from the Mediterranean to a port in England and at the time when the cargo owner believed that the corn was in transit sold it to a buyer. It was later found that the cargo had begun to deteriorate and that the master of the ship sold the said cargo to another person. The seller contended that the buyer was accountable to pay the price of the cargo on the origin the buyer had agreed to procure the cargo and all its innate risk.
The court held that there was to be no such liability as at the time of contracting, both parties were unaware that the seller no longer had corn to sell. It was much later that the United
Kingdom enacted the Sale of Goods Act (SGA) 1979 in which Section 6 of the Act 5 provides for where the contract is for the sale of specific goods which have perished by the time the contract is made, the contract is considered void.
4 Stone R, the Modern Law of Contract (8th Edition, Routledge-Cavendish, 2009)
5 ibid 3.

It is also important to note than although Section 6 of the 1979 Act does provide for damage, it does not allocate for a subject matter ceasing to exist. Thus while we do not refute that the doctrine of common mistake can be satisfactorily explained by an implied term wherein it is possible to perform the letter of the contract but it was alleged that a common mistake led to issues of construction when in essence, the performance of the said contract is highly improbable. Lord Justice Diplock in his verdict in Hongkong Fir Shipping Co Ltd v
Kawasaki Kisen Kaisha Ltd [1962] 2 QB 26, 65-66 6 stresses that the ‘every contract is infused with the amalgamation that in what event will a party be relieved of his undertakings to do that which has been agreed to but has yet to be done.’ In introducing the concept of
“innominate” 7
, Lord Diplock proclaimed that rather than seeking to classify the term itself as a condition or warranty, the court should look to the effect of the breach and ask if the breach has substantially deprived the innocent party of the whole benefit of the contract. Therefore they were not entitled to repudiate the contract for a party cannot be faulted if due diligence has already been given while undertaking the contract however it may transpire that any such delay or damages are on the part of the ship-owner.
The second category of significant common mistake in law namely mistake concerning the subjugation of ownership or Res Sua 8 which occurs when an individual contracts to purchase a property which unknown to both parties, the purchaser already owns. This is shown in the case of Cooper v Phibbs [1867]LR 2 HL 149 9 where Cooper who initially agreed to lease a salmon fishery from Phibbs when in fact Cooper was already in entitled to enjoy the fishery as a life tenant thus having no need to take the lease.
6 Grunfeld C “A Study in the Relationship between Common Law and Equity in Contractual Mistake”
7 ibid 6.
8 Peel, “ Treitel’s The Law of Contract 12th edition”, Sweet and Maxwell, 2007
9 Cartwright J, ‘Common Mistake in Common Law and Equity’ (2002) 118 L.Q.R 300

The court held that contract be void. It is clearly depicted in this instance how both parties must construe to fully being unaware for mistake as to ownership to occur. The third and final section of common mistake in common law is mistake as to quality
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which is made by both parties wherein the product or subject does not render performance as originally agreed possible. In the case of Bell v Lever Brothers Ltd [193] AC 161 HL 11 , Bell and Sneiling entered into a contract with the plaintiff company under which the agreed to serve as chairman and vice-chairman for five years. However, both were in breach of their duty and a while later their services were no longer needed and the company agreed to compensate them in relation to giving up their posts. The money was paid but later discovered that the breaches had occurred prior to that and as such the plaintiff sought to recover it. Although the jury held that the compensation was not void since the mistake involved was one of quality of service and did not affect an asset in which some quality is deemed different than it was intended to be, it is important to note that common mistake as to quality is voidable should there be great differential in the quality which originally was deemed proper to an asset.
There are several pre-requisites involved prior to fulfilling the doctrine of common mistake and these are illustrated clearly in the case of Great peace Shipping Ltd v Tsavliris Salvage
Ltd [2002] EWCA Civ, 1407, QB [2003] 12 in which the assumption of risk and whether impossibility is attributable to either party’s fault to be deliberated analogous in an outcome.
In this issue, In the case of Great Peace shipping v Tsavliris11, the Great Pease was leased in order to succour a salvage operation which was assumed to be 35 miles away from the ship.
10 Phang B.L.A “Common Mistake in English Law: the proposed merger of common law and equity” (1989) 9
LS 291
11 Ibid 6
12 G.H. Treitel, ‘Mistake in Contract’ (1988) L.Q.R. 104

However, the salvage location was much further at an additional 410 miles away and the charterers tried to avoid contract by claiming foul citing the common mistake doctrine. The court held that although the time consumed to carry out the said contract was longer, the contract was still able to be carried out. Hence, in retrospective views the performance had not become impossible to be carried out and varying from what either party had initially intended for. The court then proceeded to list down five requirements
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which had to be satisfied in order to establish grounds on which common mistake in common law can be brought up. Firstly, that there must be a common assumption as the presence of the state of affairs. Secondly, that there cannot be any additional agreement or warranty between either parties citing absolved duties in the event of a common mistake. Besides that, the lack of state of affairs must not be accounted for due to either party’s fault. Fourth, that because of the said absence, the performance of the contract must be rendered impossible. Finally, the courts stressed that the state of affairs may amount to an essential attribute of the consideration but has to be provided or that context which must have taken place if performance of the contractual undertaking is to be probable .
These additional rules in which the courts imposed highlight the complexity of the doctrine of common mistake. It is for that reason that these five requirements are indeed reducible, formatted into a three step inquisition. The term construction
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in this context means that the risk of the mistake was not in fact caused by either party thus posing the enigma whether if the effect of the said mistake is satisfactory enough to result in a breach of contract. In accordance with the five rules above, it can then be inferred whether either part has solutions for the breach or that at the said time, there was an allocation for lawful exoneration.
13 Smith J C, ‘Contracts-mistake, frustration and implied terms’ (1994) L.Q.R 400-419
14 Ibid 9

As such, if the fault therein lies on the claimant, relief as an option becomes unusable. The court will then decide if the mistake which occurred was considered essential to the possibility of the contract being carried out.
Having covered extensively on the doctrine of common mistake, we now take a look at the alternate end of the spectrum wherein the alma mater of the doctrine is reviewed. Mistake in
Equity was given to life in the case of Solle v Butcher [1950] KB 671 15 in which Lord
Denning held that a court has the equitable jurisdiction to set aside a contract that is binding in law on the ground of common mistake. In this case, both parties reached an agreement of a yearly rental of 250 pounds. However, unknown to them was that they were subjected to the
Rent Act 1977 16 which places a limit maximum of 140 pounds. The defendant in question did have the authority to increase said rent if a notice was given prior to the increment. The contract was nulled by the courts. Lord Denning in his judgement stated that the power to void a contract resides in the equitable powers of the court and is binding in law when used in context of common mistake. In a similar case, Magee v Pennine Insurance Co Ltd , Lord
Denning extended his verdict on equity by adding that ‘common mistake, however insignificant does not make a contract void at law but makes it voidable in equity.
The doctrine of common mistake in common law affords for the contract to be ceased whereas in equity, the effect of such a gaffe causes the contract to be inadequate. In addition to that, Lord Denning also takes into account third part rights which are not provided for in common. Lord Denning’s view on the equitable principle of common mistake is seen to be shared by Lord Steyn in the case of Associated Japanese Bank (International) Ltd v
Credit du Nord stating that “a narrow doctrine of common law mistake, supplemented by
15 Mac Millian C ‘How Temptation Led to Mistake: an Explanation of Bell v Lever Bros Ltd (2003) 119 L.Q.R.
16 Ibid 6

the more flexible doctrine of mistake in equity seems to me to be an entirely sensible and satisfactory state of the law’.
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Henceforth, to compare the doctrine of common mistake with the doctrine of equity requires reading of the concepts at the base level as both doctrines differ ever so slightly. In Solle v
Butcher, Lord Denning states that the party in search of reliance on the doctrine of common mistake in equity must not be at fault. Furthermore, the dogma used for the test in Bell was
‘essentially different’, while the test used by Denning in Solle was ‘fundamental misapprehension’ is deemed to be of little difference and some citing that in the context of legal definition, both carry almost the exact same meaning.
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The major juxtaposition between both doctrines would be the degree of severity in which the doctrines are applied in context. Simply put, if per say the doctrine of mistake in common law is to be used, the contract will be considered void resulting in concurrent effects to third party rights. On the other hand, if the doctrine of mistake in equity is applied, the contract will only be voidable, taking into account the protection of rights of an outsider of the original contract. It is to be noted that the arising conflict between the doctrines involved is clearly depicted in the decision of Great Peace Shipping which puts into question the existence of the equitable principle proposed by Lord Denning.
In his verdict, Lord Phillips stated that “there is no jurisdiction to grant rescission of a contract on the ground of common mistake where the contract is valid and enforceable on ordinary principles of contract law”.
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17 Peel, “ Treitel’s The Law of Contract 12th edition”, Sweet and Maxwell, 2007
18 Ibid 16
19 Phang B.L.A “Common Mistake in English Law: the proposed merger of common law and equity” (1989) 9
LS 291

He proceed to draw attention to the fact that the rule of precedent is not applicable in Solle for it was not a House of Lords decision therefore should not have any binding effect. Also, the proposed discretion in which the courts have the right to negate a contract was thought to be incoherent and too wide to be subjugated under principles. Moreover, in the context of legal definition a new problem was the definition of ‘fundamental’ in equity which was in stark contrast to Bell and this rendering it almost impossible to dictate right from wrong.
In suggesting reforms, we must first take into account both the similarities and varying subtleties of both doctrines. The first reform which can be considered is to unify both doctrines on the basis of similar ground, give or take thus creating a single doctrine under
Judicature Acts of 1873-75
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which covers both contractual agreements between the relevant parties as well as protecting third party rights. If per say that should not succeed or prove complex, the denouncement of either doctrines should be carried out to ensure singularity. As pointed out earlier, the doctrine of equity holds no precedent as it is only a Court of Appeal’s decision and thus is not binding. Finally, the most acceptable and ideal method of reform would be the enactment of a legislation that is similar to the concept of frustration wherein
Parliament passed the Law Reform (Frustrated Contracts) Act 1943
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thus allowing the courts judicial freedom to interpret each case as a viable option of either doctrines.
20 Ibid 18
21 G.H. Treitel, ‘Mistake in Contract’ (1988) L.Q.R. 104

To conclude, it is apprehensible that the doctrine of common mistake provides conviction in conformity of the law, whereas the doctrine of equity provides tractability thus enabling for a wider scope of judicial context to be applied. By allowing for two similar doctrines to dictate mistake in contract law, confusion is sure to arise and such lead to inconsistency. The courts should inherently fuse the positives of both methods depending on specific cases and thus applying either doctrine to ensure the judgement made is a clear, just and fair one.
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