The doctrine of mistake is a narrow, technically complex area. Legally, it operates only where a misunderstanding is so fundamental that it negates the contract entirely, rendering it void ab initio — a nullity producing no legal effects, which matters greatly where third-party rights are involved.

Certainty vs. Fairness

The law balances commercial certainty (a narrow doctrine, reinforced by the objective approach to agreement) against protecting parties from agreements “radically different” from what they intended.

Mistakes Preventing Formation

Cross-purpose mistakes (latent ambiguity)

Where parties are at cross-purposes with no objective resolution. In Raffles v Wichelhaus (1864), a contract for cotton arriving on a ship “Peerless” was void as two ships of that name existed and there was no objective way to choose.

Unilateral mistake as to identity

Typically a rogue defrauds a seller and sells on to an innocent third party; the question is whether the original contract was void (seller recovers goods) or merely voidable (third party keeps them).

  • Written contracts: identity is more likely fundamental. In Cundy v Lindsay (1878) the contract was void where a rogue imitated a reputable firm’s name; affirmed in Shogun Finance v Hudson (2003).
  • Face-to-face dealings: a strong presumption of intent to deal with the person present. In Lewis v Averay (1972) the contract was not void — the error was as to a creditworthiness “attribute”, not identity.

Common Mistake: Shared Fundamental Errors

Mistake as to existence (res extincta)

If the subject matter does not exist, the contract is generally void: Couturier v Hastie (1856). But a party may warrant existence and be liable for breach instead: McRae v Commonwealth Disposals Commission (1951).

Mistake as to quality

The threshold is very high. In Bell v Lever Bros (1932) a mistake about the value of service contracts was not fundamental — the parties got what they bargained for (termination of the contracts).

The modern test

Great Peace Shipping v Tsavliris Salvage (2002) requires the error to make performance impossible or radically different. A salvage ship 410 miles away (not 35) still made the contract less convenient, not impossible — so it remained valid.

The Decline of Mistake in Equity

The flexible equitable jurisdiction of Solle v Butcher (1950), which made some contracts voidable on fair terms, was effectively abolished in Great Peace as inconsistent with Bell v Lever Bros.

Corrective Mechanisms

  • Rectification: corrects a document that misrecords the agreement; FSHC Group Holdings v Glas Trust (2019) requires a subjective common intention with an “outward expression of accord”.
  • Non est factum (“it is not my deed”): a rare defence for signing a radically different document. In Saunders v Anglia Building Society (1971) it failed because the signer had been careless and the difference was not “radical” enough.