Vitiating elements - Mistake

Learning Outcomes

This article outlines mistake in contract law for SQE1 candidates, including:

• The classification of mistakes in contract law (common, mutual, unilateral) and how to distinguish them in SQE1 problem questions.
• The strict common law test for operative common mistake, including res extincta, res sua and mistakes as to possibility of performance.
• How mutual mistake can prevent contractual agreement and the role of objective interpretation in determining whether a contract exists.
• When unilateral mistake as to terms or identity renders a contract void, and how this differs from misrepresentation-based voidability.
• The significance of face-to-face versus written/remote dealings in mistaken identity and the resulting impact on third party rights and nemo dat.
• The difference between mistakes going to existence or identity of the subject matter and mere mistakes as to quality, value or attributes.
• Key authorities such as Bell v Lever Bros, Great Peace, Hartog, Shogun Finance, and leading auction and identity cases, and how to deploy them in exam answers.
• The interaction between common law and equitable responses to mistake, focusing on rectification, rescission and the narrow scope of non est factum.
• Practical exam strategies for spotting mistake issues, structuring analysis, and arguing void versus voidable consequences and available remedies.

SQE1 Syllabus

For SQE1, you are required to understand the law relating to mistake as a vitiating factor in contract formation, with a focus on the following syllabus points:

• Identify and distinguish between common, mutual, and unilateral mistake.
• Recognise when a mistake will render a contract void or voidable.
• Apply the relevant legal principles and leading cases to factual scenarios.
• Advise on the availability of equitable remedies such as rectification and rescission.
• Understand the impact of mistake on third party rights and the limits of equitable intervention.
• Explain the statutory position under the Sale of Goods Act 1979, section 6, and its limits.
• Analyse the presumption in face-to-face dealings for mistake as to identity and contrast written/remote contracting.

Test Your Knowledge

Attempt these questions before reading this article. If you find some difficult or cannot remember the answers, remember to look more closely at that area during your revision.

1. What is the difference between a common mistake and a mutual mistake in contract law?
2. In which circumstances will a unilateral mistake render a contract void?
3. Which case established the modern test for common mistake in English law?
4. What is the effect of a mistake as to identity in a face-to-face contract?
5. What equitable remedies may be available where a contract fails to reflect the parties’ true agreement?

Introduction

Mistake is a vitiating element in contract law that may affect the validity of an agreement. A mistake can arise where one or both parties enter into a contract under a fundamental error about a fact or assumption. The law distinguishes between different types of mistake, each with specific requirements and consequences. Not all mistakes will affect the enforceability of a contract—only those that go to the root of the agreement may render it void or voidable. A mistake that is operative at common law may prevent formation (no contract) or render the contract void ab initio. Equity does not provide a separate general jurisdiction to rescind for common mistake; modern authority confines relief to specific equitable remedies such as rectification and limited doctrines like non est factum. Understanding the types of mistake and their legal effects, the interaction with misrepresentation, and the impact on third party rights is essential for SQE1.

Types of Mistake

Common Mistake

A common mistake occurs when both parties share the same erroneous belief about a fundamental fact at the time the contract is made. The mistake must be so serious that it makes performance of the contract impossible or the subject matter essentially different from what was intended. Courts apply a narrow test.

Key Term: common mistake
A shared error by both parties about a fundamental fact existing at the time of contract, which may render the contract void if it is sufficiently fundamental.

The leading authority is Bell v Lever Bros Ltd [1932] AC 161. The House of Lords held that only a mistake that destroys the identity of the subject matter—not merely its quality—will render a contract void. This principle was clarified and narrowed in Great Peace Shipping Ltd v Tsavliris Salvage (International) Ltd [2002] EWCA Civ 1407, which set out the following requirements:

• There must be a common assumption as to the existence of a state of affairs.
• Neither party must have warranted that state of affairs.
• The non-existence of the state of affairs must not be due to the fault of either party.
• The non-existence must render performance impossible.
• The state of affairs must be essential to the contract.

The Court of Appeal rejected a wider equitable jurisdiction to rescind for common mistake, confining operative common mistake to the strict common law test. Modern cases emphasise that in rare circumstances, even if performance is technically possible, a mistake can be operative where performance would be radically different from what was contemplated (for example, where contractual performance would not achieve the common commercial purpose). However, mere mistakes as to quality or value will not suffice.

Common mistake often arises in these sub-categories:

• Mistake as to existence (res extincta): both parties believe specific goods or the subject matter exist when they do not. Section 6 of the Sale of Goods Act 1979 codifies the rule for specific goods: if they have perished without the seller’s knowledge at the time of the contract, the contract is void (Couturier v Hastie (1856)).
• Mistake as to title (res sua): parties attempt to transfer a right the buyer already owns; the transaction is void (Cooper v Phibbs (1867)).
• Mistake as to possibility of performance: where physical, legal, or commercial impossibility makes performance impossible or radically different (Sheikh Brothers v Oschner [1957] AC 136 (physical yield impossibility); Griffith v Brymer (1903) (commercial purpose undermined)).

Courts will look closely at risk allocation. If one party warrants existence (or assumes the risk), the contract will not be void on the basis of common mistake and the proper remedy lies in breach of contract. In McRae v Commonwealth Disposals Commission (1951) 84 CLR 377, the seller warranted the existence of a tanker that never existed; the court held the contract valid and the seller liable for breach. Conversely, where neither party assumes the risk and the mistake goes to the essential existence or identity of the subject matter, the contract is void.

Mistakes as to quality rarely render contracts void. Bell v Lever Bros confirms that even serious mistakes about quality or value (e.g., unknown right to dismiss employees without compensation) are generally insufficient, absent a mistake that affects an “essential and central element” of the subject matter (contrast Scott v Coulson [1903] 2 Ch 249, where a life policy sold when the life assured was already dead was held void).

Worked Example 1.1

Scenario: A agrees to sell B a specific car, but unknown to both, the car was destroyed in a fire the day before the contract.

Answer:
This is a common mistake as to the existence of the subject matter. The contract is void because the car no longer exists, making performance impossible.

Worked Example 1.2

Scenario: Seller agrees to sell “the wrecked tanker lying on Jourmand Reef,” believed by both to exist. The seller’s listing and terms state the tanker is on the reef and available to salvage.

Answer:
If the seller warranted existence (as in McRae), the contract is not void for common mistake. The buyer can claim damages for breach because the risk of non-existence was assumed by the seller.

Mutual Mistake

A mutual mistake arises when both parties are at cross-purposes about a fundamental term, so there is no true "meeting of the minds." If the misunderstanding is so significant that a reasonable person could not say there was agreement, the contract is void.

Key Term: mutual mistake
A situation where both parties misunderstand each other, so that there is no true agreement on the terms or subject matter of the contract.

The classic case is Raffles v Wichelhaus (1864) 2 H&C 906, where a contract referred to a ship named "Peerless," but there were two ships with that name sailing at different times. Each party had a different ship in mind, so there was no contract.

Where mutual mistake concerns the nature or subject matter of the bargain and neither party is at fault, courts may find no contract. By contrast, if the ambiguity could have been resolved by reasonable diligence and the mistake is due to one party’s fault or carelessness, the court is unlikely to declare the contract void. In Tamplin v James (1880) LR 15 Ch D 215, the buyer mistakenly believed an inn’s garden was included; the particulars clarified it was not. The buyer’s failure to check the particulars meant the agreement was upheld.

Mutual mistake can also arise over the subject matter’s identity or value. In Scriven Bros & Co v Hindley [1913] 3 KB 564, hemp and tow bore similar marks at auction; the buyer bid believing both lots were hemp. Given the confusing marking and the auctioneer’s knowledge of likely confusion, the court held there was no contract for the tow lot.

Worked Example 1.3

Scenario: X agrees to buy "the green car" from Y, believing it is a sports car, while Y thinks it is a family hatchback. Both have different cars in mind.

Answer:
This is a mutual mistake. There is no contract because there is no agreement on the subject matter.

Worked Example 1.4

Scenario: At auction, Lot A (hemp) and Lot B (tow) both bear “SL.” The buyer saw samples of “SL goods” and bids for B believing it is hemp.

Answer:
Given the confusing marks and the auction context, a court may find no agreement (mutual mistake) for Lot B and refuse to enforce payment for tow.

Unilateral Mistake

A unilateral mistake occurs when only one party is mistaken about a fundamental aspect of the contract, and the other party knows or ought to know of the mistake. In limited circumstances, such a mistake can render the contract void.

Key Term: unilateral mistake
An error by one party about a fundamental term or the identity of the other party, which may render the contract void if the other party knew or should have known of the mistake.

Mistake as to Terms

If one party is mistaken about a term and the other party knows or ought to know of the mistake, the contract may be void. This is especially relevant where the mistake is obvious or the non-mistaken party seeks to "snap up" an offer they know was made in error.

Key Term: mistake as to terms
A situation where one party is mistaken about a fundamental term of the contract, and the other party knows or should know of the mistake.

A classic example is Hartog v Colin & Shields [1939] 3 All ER 566. The seller mistakenly offered hare skins priced per pound instead of per piece; the buyer knew (or should have known) the usual trade practice. The court refused enforcement because the buyer could not reasonably believe that the offer reflected the seller’s true intention.

Courts typically require three conditions for unilateral mistake to void a contract:

• The non-mistaken party was aware, or should have been aware, of the mistake at the time of contracting.
• The mistake relates to a term that induced the mistaken party to enter the contract; a collateral matter is insufficient. For example, in Smith v Hughes (1871) LR 6 QB 597, buying “oats” did not entail a term that they be “old oats”; the buyer’s belief about quality was collateral, so the contract stood.
• The mistaken party was not at fault (e.g., not reckless or careless) in reaching the mistaken conclusion.

Mistake as to Identity

A mistake as to identity may render a contract void if the mistaken party intended to contract only with a specific person and the other party knew this. The law distinguishes between written/remote deals and face-to-face contracts:

• Written/remote contracts: If the written document identifies a specific person, and a fraudster impersonates that person, the contract may be void. In Cundy v Lindsay (1878) 3 App Cas 459, correspondence was with “Blenkiron & Co”; the rogue was not that firm, so there was no contract. In Shogun Finance Ltd v Hudson [2003] UKHL 62, a hire-purchase agreement named a specific identity whose credit had been checked; the imposter signed under that identity. The House of Lords held the agreement was with the named person only, making the imposter’s transaction void for mistake as to identity.
• Face-to-face contracts: There is a strong presumption that a party intends to contract with the person physically present, so the contract is usually only voidable (often for misrepresentation), not void. In Lewis v Averay [1972] 1 QB 198 and Phillips v Brooks [1919] 2 KB 243, buyers impersonated known persons; the courts treated identity as collateral to creditworthiness and held the original contracts voidable, not void.

Key Term: mistake as to identity
A category of unilateral mistake where one party makes a mistake as to the identity of the other party, intending to contract only with that specific person, and the other party knows this.

This distinction is critical for third party rights. If the original contract is void, the rogue acquires no title and cannot pass it on (nemo dat). If voidable, title may pass to a bona fide purchaser for value before rescission, leaving the mistaken party to sue the rogue for misrepresentation or deceit. Statutory rules (e.g., Sale of Goods Act 1979, s 12; Consumer Rights Act 2015, s 17) protect buyers who acquire title from sellers with title; they do not help where the original seller never parted with title because the first contract was void.

Worked Example 1.5

Scenario: C sells a car to a person who claims to be "Mr Smith" and presents ID. The seller checks the ID and believes he is dealing with Mr Smith, but it is actually a fraudster.

Answer:
If the contract is in writing and the seller intended to contract only with Mr Smith, the contract may be void for mistake as to identity.

Worked Example 1.6

Scenario: D advertises a car. A person arrives claiming to be a famous actor, shows a studio pass and signs a cheque. D lets him take the car. The cheque later bounces, and the rogue sells the car to an innocent purchaser for value.

Answer:
In a face-to-face deal, the strong presumption is that D intended to contract with the person present. The original contract is voidable for misrepresentation, not void for mistake. Title may pass to the bona fide purchaser unless rescission occurred before the resale, so D likely cannot recover the car from the third party.

Mistake as to the Nature of the Document (Non Est Factum)

A narrow doctrine protects those who sign a document in the mistaken belief that it is of a fundamentally different character.

Key Term: non est factum
A defence allowing a signatory to avoid a document if, without fault, they signed believing it to be of a fundamentally different nature, and there is a radical difference between what was signed and what was thought to be signed.

The requirements are strict. The mistake must be fundamental and the signatory must not have been careless. The doctrine is typically confined to those with special difficulties understanding the document (e.g., disability, language barrier). If satisfied, the document is not binding on the mistaken signatory.

Equity and Mistake

Rectification

Where a written contract fails to reflect the parties’ true agreement due to a mutual mistake, the court may order rectification so that the document matches the actual agreement. Rectification does not rewrite the bargain; it corrects the record to reflect the common intention established by convincing evidence of the prior agreement.

Key Term: rectification
An equitable remedy allowing the court to amend a written contract to reflect the parties’ true agreement where there was a mutual mistake in recording it.

Rectification requires proof of a concluded antecedent agreement or common continuing intention that the written instrument failed to capture. Evidence of the parties’ actual understanding is admissible. The court may refuse rectification if it would be inequitable, including where rights of innocent third parties have intervened. Key authorities include Joscelyne v Nissen [1970] 2 QB 86 and Chartbrook Ltd v Persimmon Homes [2009] UKHL 38.

Rescission

Rescission is an equitable remedy that sets aside a contract and restores the parties to their pre-contractual positions. It may be available where a contract is voidable for mistake, misrepresentation, or other vitiating factors. There is no separate equitable jurisdiction to rescind solely for common mistake beyond the narrow common law doctrine; that position was confirmed in Great Peace.

Key Term: rescission
The setting aside of a contract and restoration of the parties to their pre-contractual positions, usually available where the contract is voidable.

Rescission is subject to bars, including affirmation, lapse of time, impossibility of substantial restitution, and third party rights. Courts focus on practical justice: rescission will not be denied merely because precise restoration is impossible if substantial restoration can be achieved. In Salt v Stratstone Specialist Ltd [2015] EWCA Civ 745, rescission of a car sale misrepresentation claim was granted despite registration and use, as substantial restoration was possible. In Leaf v International Galleries [1950] 2 KB 86, lapse of time barred rescission for non-fraudulent misrepresentation.

Limits and Consequences

Not all mistakes will affect a contract’s validity. Only mistakes that go to the root of the contract—such as the existence or identity of the subject matter, or a fundamental term—may render a contract void. Mistakes as to quality, value, or attributes are rarely sufficient.

Where a contract is void for mistake, it is treated as if it never existed. Where mutual mistake prevents formation, there is no contract at all. Where a contract is voidable (e.g., for misrepresentation), it remains valid until set aside. The distinction is important for third party rights:

• Void contracts cannot transfer title; a rogue cannot pass good title to an innocent third party (nemo dat quod non habet).
• Voidable contracts may transfer title to a good faith purchaser for value before rescission.

In mistaken identity, the mode of contracting matters. Written or remote agreements that specify identity are more likely to be void if an imposter intervenes, whereas face-to-face interactions generally produce voidable agreements.

Under the Sale of Goods Act 1979, section 6, a contract for specific goods is void if the goods had perished at the time of contracting without the seller’s knowledge. That codified rule reflects common mistake as to existence; it does not apply where the seller warranted existence or assumed the risk, in which case the remedy is for breach. Courts will prefer to enforce risk allocations evident in the parties’ agreement rather than expand the doctrine of mistake.

Exam Warning

Be careful to distinguish between void and voidable contracts in mistake scenarios. This affects third party rights and remedies available. In face-to-face mistaken identity cases, there is a strong presumption that the seller intended to deal with the person present, so the contract is generally voidable (often for misrepresentation) rather than void. In written/remote contracting, if the identity was fundamental and specified, the contract may be void for mistake, preventing title from passing to third parties.

Key Point Checklist

This article has covered the following key knowledge points:

• The three main types of mistake: common, mutual, and unilateral.
• The modern test for common mistake (Great Peace) and the narrow scope of operative mistakes.
• Illustrative categories: res extincta, res sua, and mistakes as to possibility of performance.
• The requirements for unilateral mistake to render a contract void (awareness, term not collateral, and absence of fault).
• The distinction between mistakes as to terms and mistakes as to identity, including face-to-face versus written/remote contracting.
• The effect of mistake on the validity of a contract and third party rights, including nemo dat and the impact of void versus voidable status.
• The availability and limits of equitable remedies such as rectification and rescission; no separate equitable rescission for common mistake.
• The strict limits of non est factum for mistaken signature of documents.

Key Terms and Concepts

• common mistake
• mutual mistake
• unilateral mistake
• mistake as to terms
• mistake as to identity
• non est factum
• rectification
• rescission