Learning Objectives: Students will: a) learn the difference between Common Mistake and Mistake negativizing Consent b) discover the strong link between mistake and frustration

1. Vitiating Elements
in the Formation of
a Contract
 Misrepresentation
 Mistake
 Frustration
Duress and Undue Influence

3. Amalgamated Investment and
Property Co Ltd v John Walker &
Sons Ltd (1977)
• John Walker Ltd sold to Amalgamated Investment Co Ltd a
bonded warehouse and bottling factory for £1,710,000 for
occupation or redevelopment.
• Amalgamated asked whether the building was designated historic
or of architectural interest.
• John Walker said it was not historic.
• Unfortunately, on 22 August 1973 the Department of
Environment listed the property. The property value dropped to
£200,000 (because a listed property which one cannot easily
develop is often worth less money).
• The contract was signed on 25 September 1973.

4. Common Mistake or
Frustration?
Figure it out yourselves

5. Common Mistake
Must relate to something which both
parties must necessarily have accepted in
their minds as an essential element of the
subject matter

6. Common Mistake
• The effects of common mistake go to the
question of whether a contract has been formed
where the parties have reached agreement, but
have done so on the basis of a shared false
premise and share some similarities with
frustration.
• Mistake is common to both parties, the parties
have reached agreement, but that agreement is
based upon a fundamental mistaken assumption.

7. Bell v Lever Brothers Ltd (1932)
Page 246 of McKendrick

8. Instances of Common Mistake
• Mistake as to existence of subject-
matter
• Mistake as to identity of subject-matter
• Mistake as to possibility of performing
the contract
• Mistake as to quality

9. Existence of subject-matter
Galloway v Galloway (1914)
• The defendant, assuming his wife to be dead,
married the claimant. The defendant and the
claimant later separated and entered into a
deed of separation under which the
defendant promised to pay a weekly
allowance.

10. Existence of subject-matter
Galloway v Galloway (1914)
• The defendant, later discovered that his first wife
was still alive and fell into arrears.
• When the claimant sued to recover the arrears it
was held that she could not do so because the
separation agreement was void on the ground on
the ground of a common mistake.

11. Identity of subject-matter
This sort of mistake arises where one
party intends to deal with one thing and
the other with a different thing.

12. Raffles v Wichelhaus (1864)
• Defendants agreed to buy from claimants a
cargo of cotton to arrive ‘ex Peerless from
Bombay’.
• Parties were unaware that there were two
ships called ‘Peerless’ and both sailed from
Bombay. One sailed in October and the other
in December.

13. Raffles v Wichelhaus (1864)
• When the cotton arrived, the defendants
refused to accept the delivery because they
argued that the claimants were obliged to
deliver the cotton on the Peerless which
sailed in October.
• The plaintiffs sued for the price of the cotton
arrived on the Peerless sailing in December.

14. Raffles v Wichelhaus (1864)
• The court concluded that, the fact that the parties
appeared to be on cross-purposes gave the
defendants a strong defence.
• This case has generally been understood by contract
lawyers to stand for the proposition that latent
ambiguity in the terms of an offer and acceptance
can operate to negative consent in appropriate cases.

15. Possibility of performing the
contract
Physical
Impossibility
Commercial
Impossibility
Legal
Impossibility

16. Sheikh Bros Ltd v Ochsner

17. Sheikh Bros Ltd v Ochsner
• The appellants granted to the respondents a license
to enter and cut sisal growing on their land and in
return deliver 50 tons of sisal per month.
• Unknown to both, the land was incapable of
producing an average of 50 tons of sisal per month.
• The contract was void.

18. Cooper v Philibbs (1867)
• The appellant agreed to take a lease of a salmon
fishery which both parties believed to be the
property of the respondents.
• It was subsequently discovered that the appellant, as
the tenant in tail, was the owner of the fishery.
• The agreement was set aside on the ground that it
was legally incapable of performance because the
appellant was already the owner of the fishery.

19. Griffith v Brymer (1903)
• The parties entered into a contract for the hire of a
room for the purpose of viewing the coronation
procession of Edward VII. The procession was
cancelled because of the illness of Edward VII.
• The parties concluded the contract at 11am but
unknown to both parties, the decision to operate on the
King was taken on 10am.
• The contract was held to be void as the cancellation
undermined the commercial object of the contract.

20. Mistake as to Quality
Great Peace Shippping Ltd v Tsavliris Salvage
(International) Ltd (2002)

21. Elements to be present for common
mistake
• There must be a common assumption as to the existence of a state
of affairs
• There must be no warranty by either party that that state of affairs
exists
• The non existence of the state of affairs must not be attributable to
the fault of either party
• The non existence of the state of affairs must render performance
of the contract impossible
• The state of affairs may be the existence of a vital attribute of the
consideration to be provided or circumstances which must subsist if
performance of the contractual adventure is to be possible

22. Application in
Bangladeshi Law
Mistake and its effects

23. Contract caused by mistake of one
party as to matter of fact
•Sec 22: A contract is not
voidable merely because it was
caused by one of the parties to
it being under a mistake as to a
matter of fact

24. Effect of mistakes as to law
• Sec 21: A contract is not voidable
because it was caused by a mistake as to
any law in force in Bangladesh; but a
mistake as to a law not in force in
Bangladesh has the same effect as a
mistake of fact.

25. Effect of mistakes as to law
• A and B make a contract grounded on
the erroneous belief that a particular
debt is barred by the Bangladesh Law
of Limitation: the contract is not
voidable.

26. Agreement void where both parties
are under mistake as to matter of
fact
20. Where both the parties to an agreement are
under a mistake as to a matter of fact essential
to the agreement, the agreement is void.
• Explanation - An erroneous opinion as to
the value of the thing which forms the
subject-matter of the agreement is not to be
deemed a mistake as to a matter of fact.

27. • (a) A agrees to sell to B a specific cargo of goods
supposed to be on its way from England to
Chittagong. It turns out that, before the day of the
bargain, the ship conveying the cargo had been cast
away and the goods lost. Neither party was aware of
the facts. The agreement is void.

28. Doctrine of Frustration
• A contract is frustrated where, after the contract was
concluded, events occur which make performance of
the contract impossible, illegal or something radically
different from which was in the contemplation of the
parties at the time they entered into the contract.
• A contract which is discharged on the ground of
frustration is brought to an end automatically by
operation of a rule of law, irrespective of the wishes
of the parties.

29. The doctrine of Frustration
presently operates within very
narrow confines
TWO PRINCIPAL REASONS

30. Reluctance of Courts to apply this
doctrine
• Davis Contractors Ltd
v Fareham UDC (1956)
• Channel Island Ferries
Ltd v Sealink UK Ltd
(1988)

31. Benefits of specific Provisions

32. Application of Doctrine of
Frustration
• Impossibility of performance: Taylor v Caldwell
(1863)
• Frustration of purpose: Krell v Henry (1903)
and Herne Bay Steam Boat Co v Hutton (1903)
• Supervening illegality: Fibrosa Spolka Akcyjna v
Fairbairn Lawson Combe Barbour Ltd (1943)

33. Major difference and similarities
between Frustration and Common
Mistake
Conclusion of Chapter IV of Ewan McKendrick