Unilateral Mistake:
In a unilateral mistake, the most common type of mistake, only one party in the contract is mistaken about a term or provision in the contract. A party can be mistaken on the price of an item, the identity of the other contracting party, inter alia.
For the most part, the other non-mistaken party is usually aware of the mistake by the mistaken party and makes no mistake himself.
Forms of Unilateral Mistakes:
Whilst a party in a contract can be mistaken about almost anything in a contract, the following are common forms of unilateral mistakes:
1. A party can be mistaken about the other party’s identity.
2. Mistakes on the number of goods to be delivered.
3. Mistakes on the meanings of words amongst others.
Usually, mistakes on the other party’s identity are the most common form of unilateral mistake and shall be discussed in this note.
Unilateral Mistake on the Identity of the Other Party:
When a party in a contract believes the other party he is dealing with is of a certain identity, yet this belief turns out to be erroneous, then there is a mistake regarding the identity of the other party. For example, you contract with a person thinking they are X, when in fact they are Y.
Unilateral mistakes regarding the identity of the other party can easily be understood in the context of internet fraud. In most instances, a party is being misled to think they are dealing with either a person in a position of power or a particular person with the capacity to deliver on their representations in the contract. For instance, you contract with a person thinking they are the prince of Dubai offering to sell you oil when in reality, the person is not (you get the gist lol).
As in the above scenario, most unilateral mistakes as to the identity of a contracting party are induced by a party known as the rogue.
Rules Governing Unilateral Mistakes:
1. When a party makes an offer to a definite person or party, the offer can only be accepted by that person or party.
In the case of Boulton v Jones, an order for goods from Brocklehurst was accepted and responded to by the claimant, and the defendant refused to pay for the goods. The courts held that the request for goods was to Brocklehurst, and could not be accepted by any other person. The contract was declared void.
2. A contract is void if it is established that there was a mistake as to the identity of the contracting party:
To establish that there was a mistake as to the identity of the contracting party, the courts consider the following:
i. That the mistaken party intended to deal with some person other than the rogue, and the rogue knew of this intention.
ii. That the mistaken party took reasonable steps to ascertain and verify the identity of the person he eventually contracted with.
iii. That at the time the contract was formed, the identity of the other party to the contract was of crucial importance to the mistaken party.
When the above conditions are met and proven by the mistaken party, then it would have been established that there was a mistake as to the identity of the contracting party.
The consequence of Establishing that there was a Mistake as to the Identity of the Contracting Party:
If a rogue acquires title to goods, and it is established that there was a mistake as to the identity of the rogue, then the following consequences arise:
i. The contract between the mistaken party and the rogue is void.
ii. The rogue cannot transfer the title of the goods to another party, based on the principle of Nemo dat quad non-habet, which translates as “no one can give what they do not have”. Thus, the rogue did not himself acquire valid title to the goods, and cannot thus transfer to another party a valid title he did not or does not have.
iii. The mistaken party can recover the goods from the third party to whom the rogue had transferred the goods.
iv. The third party can have a remedy against the rogue.
In the case of Cundy v Lindsay, the House of Lords held that there was a mistake as to the identity of the rogue when Lindsay thought they were dealing with Blenkiron & Co, when in fact such thought was fraudulently induced by Blenkarn, the rogue. The court held that the title of the rogue was void, and he could not thus transfer a valid title to Cundy.
3. When the mistaken party cannot establish that there was a mistake as to the identity of a contracting party, the contract between the rogue and the mistaken party is only voidable:
If it is not established that there was a mistake as to the identity of a contracting party, the contract between the rogue and the mistaken party is voidable and not void ab initio.
Consequences of Failing to Establish that there was a Mistake as to the Identity of a Contracting Party:
i. The rogue would be deemed to have attained valid title to the goods.
ii. The rogue can validly transfer the title of the goods to a third party.
iii. If the mistaken party did not take any action to rescind the contract before the transfer of title to a third party, the third party would have equally obtained valid title to the goods, and the mistaken party cannot recover the goods from the third party.
iv. If the mistaken party can find the rogue, he can obtain a remedy against him.
In contrast to the case of Cundy v Lindsay, the court in the case of King’s Norton Metal Co. Ltd v Edridge Merrett& Co. Ltd held that there was a valid transfer of title from the rogue to a third party because the rogue in his dealings with King Norton Metal Co. Ltd, merely misrepresented his attributes to appear more prominent and that King Norton Metal intended to contract with the rogue after being convinced of his prominence.
4. When the Party X Transacts with Party Y Face to Face (, thus the contract is inter praesentes), there is a Strong Presumption that X Intended to Transact with Y Due to the Physical Presence of Y at the Time of Contracting:
In the case of Phillips v Brooks, for instance, the court held that Phillips had intended to contract with North, a rogue who was physically present in Phillips’ shop and claimed to be one Sir George Bullough.
However, in the case of Ingram v Little, the court held that the Ingrams had only intended to contract with one Hutchinson and not the rogue who was physically present and had misrepresented himself to be the said Hutchinson.
In the case of Lewis v Averay, however, the court again upheld the ruling in Phillips v Brooks. In Lewis v Averay, the claimant was informed by the rogue that he is one Richard Greene, a well-known actor. After verifying the identity of the rogue, the claimant accepted a cheque as payment for a car he sold to the rogue. When the cheque bounced and the claimant sought to recover the car from the defendant who had acquired the car from the rogue, the court held that the contract between the rogue and the claimant was only voidable and not void and that the rogue had transferred a valid title to the defendant. The court stated that there was a presumption that the claimant wanted to deal with the party they physically contracted with.
Rebuttal of the Presumption in Contracts Inter Praesentes
Whilst there is a presumption that an offeror intended to contract with the party physically present at the time of contracting, the presumption has the following rebuttal:
When the rogue dishonestly claims to be acting for a supposed principal, the presumption in contracts inter praesentes is rebutted and the resulting contract is deemed void. The reason for the contract being void is that the rogue is not actually acting on behalf of the principal, and cannot thus enter into a binding contract on behalf of the principal. In addition, the mistaken party intended to enter into the contract with the principal. In the case of Hardman v Booth, the court held that the contract between the plaintiff and one Edward Gandell, who fraudulently claimed to be an agent of Gandell & Co, was void. Also see the case of Lake v. Simmons (a case involving the sale of jewelry to a rogue, and in which the court held that there was a contract between the claimant and the rogue). Also, see the case of Shogun Finance Limited v. Hudson