400012680 22/10/2022

Within the scope of contract law, in certain circumstances a contract may be void at

common law because of the presence of a mistake by parties concerned with the contract. There

are three types of mistakes, these are common mistake, mutual mistake and unilateral mistake.

Common mistake is where both parties enter into a contract under a shared fundamental

misconception which renders the subject matter of the contract different from the state in which

both parties believed it had existed at the time of the execution of the contract. Relating to the

issues of subject matter, there are usually three distinctions. These are the existence of the

subject matter also known as Res Extincta which the ownership of the subject matter and the

quality of the subject matter, res sua which is a mistake as to the ownership of the subject matter,

and mistake as to the quality of the subject. When the courts are faced with mistakes of the

quality of the subject matter, both at common law and equity, they are met by much confusion.

Mistakes of quality of subject matter refers to the situation in which both parties believe the

subject matter of a contract is of a certain quality when reality it is not, this is enforced by the

words of Lord Atkin. He said, “a mistake will not affect assent unless it is the mistake of both

parties, and is as to the existence of some quality which makes the thing without the quality

essentially different from the thing as it was believed.” The celebrated decision of The Great

Peace [2003]1 appeared to deeply critique the equitable approach in the case of Solle v Butcher2.

However, despite the conversations and decisions made in The Great Peace Case3 there is still

much confusion as to whether equity or common law is preferred when approaching issues of

1
Great Peace Shipping Ltd v Tsavliris Salvage International) Ltd [2003] QB 679

2
Solle v Butcher [1950] 1 KB 671

3
IBID
400012680 22/10/2022

quality of the subject matter. Both Great Peace and Solle v Butcher are a part of a trilogy of cases

which includes Belle v Lever Bros.

In the case of Bell v Lever Bros4 Mr. Bell, who was the managing director of a company

owned by Lever Bros Ltd, had traded for personal profit during his employment. This was

contrary to his contract with the company. Without knowledge of this, Lever Bros Ltd made an

offer of redundancy to Mr. Bell, terminating his contract and offering £30,000 payment as

compensation. The issue was whether the contract accepted by Mr. Bell could be void by

common mistake after Lever Bros Ltd. Learned about his breach of contract. Lord Atkins asked

whether the state of new facts destroys the identity of the subject matter as it was in the original

contract. The court held that the contract was not void under common law as the mistake of the

quality of the subject matter was not an “essential or integral”5 part of the contract. The courts

stated that only a mistake as to the identity of the parties or of the subject matter, along with the

quality of the subject matter would successfully revoke consent and void the contract. The courts

final decision was that the mistake must be essential to the identity of the contract. This case

shows the practical difficulty when determining what qualities of the mistake are essential when

rendering a contract void.

The case of Solle v Butcher6 the equitable approach to mistake regarding the quality of

the subject matter of a contract is explored. In this case, an apartment had been rented for the

price of £140. Numerous improvements to the apartment were made and as such the landlord

4
Bell v Lever Bros Ltd [1932] AC 161

5
IBID

6
Solle v Butcher [1950] 1 KB 671
400012680 22/10/2022

wanted to raise the rent from £140 to £250. The landlord failed to abide by the legal

requirements to change the price of rent under the Rent Restrictions Act. Due to this, the rent

was fixed at £140 under the law. Solle, the claimant tried to sue Butcher, the Landlord, for

restitution of overpaid rent. Butcher made a counterclaim for recission of the lease on the ground

of common mistake to avoid paying restitution for the rent which was already paid. The Court

held that the lease contract was voidable and was set aside. Butcher had made a mistake which to

him was so fundamental that he would not even consider renting out the apartment for seven

years if he could only have charged £140 a year for it, essentially the change of quality of the

subject matter was too significant to decide that it is not relevant, as if the price could not

change, Butcher would not make the agreement. It would be unfair to allow the claimant to take

advantage of the mistake since £250 is the proper rent and it was permitted by the Rent Acts after

procedures are taken. Denning LJ explored the common law and equitable doctrines of mistake.

He believed that the fusion of common law and equity under the Judicature Acts created two

categories of mistake in English Law. These are a mistake in common law, which renders a

contract void and a mistake in equity which renders a contract voidable. Voidable meaning that

the contract can be made void if conditions are met to do so. Denning LJ went on further to

discuss the case of Bell v Lever Bros7. He said that common mistake as to the quality of the

subject matter will render a contract voidable. He believes that if the Belle v Lever Bros8 had

been considered on equitable grounds, the final decision might have been different. Equity

reserves the right to decide despite the potion of the common law in the interest of justice. He

sought for the creation of an equitable doctrine where contracts would be made voidable in

7
Bell v Lever Bros Ltd [1932] AC 161

8
IBID
400012680 22/10/2022

equity regardless of their status in common law. The aim and rule for courts of equity is that they

would relieve a party from consequences of their own mistake once it won’t provide injustice to

third parties.

In the case of Associated Japanese Bank Ltd9 the subject matter of the contract did not

exist. In this case the claimants, Associated Japanese Bank, bought three machines from a client.

As part of the contract for the purchase, they had to lease the machines back. This client failed to

pay the lease agreements and went bankrupt. The claimants decided to sue the defendants for the

money owed, however it was discovered that the engineering machines did not exist. The issue

was whether there was a contract between the defendant and claimant could be void or voidable

since the subject matter had not existed. It was held that the contract between the complainant

and the defendants were void. The existence of the subject matter was fundamental to the

contract and the mistake of its existence was shared by both parties making the subject matter

different from what they had believed. The courts had stated that to render a contract void, the

subject matter had to be “essentially and radically different from what they had initially believed

and agreed to enter into. This case saw the revival of the existence of common mistake under

common law and the contract was rendered void rather than voidable, as it would be under

equity.

Since then, there has been the most recent decision in the Great Peace Case10. In this case,

the defendants, Tsavliris Salvage International Ltd, were a salvage company in the South Indian

9
Associated Japanese Bank v Credit Du Nord SA [1989] 1 WLR 255

10
Great Peace Shipping Ltd v Tsavliris Salvage International) Ltd [2003] QB 679
400012680 22/10/2022

Ocean. A ship called the Cape providence needed help after it got damaged at sea. The

defendants were looking for nearby merchant ships to assiat them and Great Peace Shippling Ltd

said they were close to the ship, about 30 miles away. The defendants commissioned the

claimants to help the ship. However, there was a mistake, rather than being 30 miles from the

ship, they were some 410 miles from the ship. Since the Cape Providence was in desperate need

of help, the defendants cancelled the contract with the claimants and asked another ship for

assistance. The claimants sued for their contract fee however the defendants argued that the

distance was a common mistake and this would invalidate the contract. It was held that this was

not a common mistake that would void the contract between the claimant and the defendant as it

was a matter of the quality of the performance of the contract. The most relevant question is

whether this decision had overruled the decision in Solle v Butcher. Within the commentary of

this case, the court said, “there could be no justification for allowing a broader doctrine of

common mistake in equity than that which existed at common law”11. This shows that the court

took an all or nothing approach, deciding that if it is void at common law, it will be void at

equity. This directly rejects the opinions of Denning LJ and creates confusion as to the correct

methods for resolution in situations where the quality of the subject matter of the contract is at

question. The effects of the liberal approach of equity were also explored. The concern was

raised that it might tamper with the security of contracts and make rules very unpredictable. In

this case, the equitable doctrine of mistake as it was, no longer exists in English law as it is

inconsistent with Bell v Lever Bros. Denning LJ wanted mistake to render contracts voidable

rather than void because he believes when contracts are void, it will cause injustice to third

parties, for example, customers who purchased defrauded goods from a rogue under a void

contract in good faith. Consequently, as injustice to third parties is reduced, the types of mistakes
11
IBID
400012680 22/10/2022

that are actionable can expand beyond the existing categories and help further the development

of the doctrine of mistake within common law. However, this is not to say that the case of Solle

v Butcher is obsolete as it is still considered good law today within the legal profession.

Although it has already been established, the Great Peace decision has helped to reinforce the

existence of categories within common mistake and the idea that for a contract to be void under

common mistake, it requires elements to make the performance of the contract impossible. This

is where the confusion and difficulty arise. How would those in the legal profession know

whether to apply the common law doctrines of common mistake or the equitable doctrines of

common mistake. Further, it is hard to determine whether the equitable doctrines, established in

Solle V Butcher and by Denning LJ, is a suitable option after the decisions made in the Great

Peace Case. Great peace sought to make void what would have been voidable under equity,

however it has not overruled Solle v Butcher, so there is much confusion as to which approach is

best when examining the quality of the subject of a contract.

In conclusion, with the appearance of cases of common mistake relating to the quality of

the subject matter, there will continue to be massive confusion and conflicting views on

appropriate approaches towards these scenarios. Solle v Butcher sought to clear the waters by

intruding the equitable doctrine, unfortunately this was changed in the Great Peace case. Great

Peace brought forward little clarity for the way courts should approach common mistake under

the law.

Bibliography

Associated Japanese Bank v Credit Du Nord SA [1989] 1 WLR 255

Bell v Lever Bros Ltd [1932] AC 161

Great Peace Shipping Ltd v Tsavliris Salvage International) Ltd [2003] QB 679

Solle v Butcher [1950] 1 KB 671