Cundy v Lindsay (1878) 3 App Cas 459

A rogue, Blenkarn, impersonated a reputable firm to fraudulently obtain handkerchiefs from Lindsay & Co. He then sold them to an innocent third party, Cundy. The House of Lords held that no contract ever existed between Lindsay and the rogue, meaning title never passed.

Facts

The case concerned a quantity of linen handkerchiefs ordered from the respondents, Lindsay & Co., who were manufacturers in Belfast. The order came from a fraudulent individual named Alfred Blenkarn, who was operating from a room he had rented at 37 Wood Street, Cheapside. Blenkarn intentionally signed his correspondence in a manner that made his name appear to be ‘Blenkiron & Co.’. ‘Blenkiron & Co.’ was a well-known and reputable firm located at 123 Wood Street. Lindsay & Co., believing they were dealing with the respectable ‘Blenkiron & Co.’, dispatched the goods on credit to ‘Blenkiron & Co., 37 Wood Street’. Blenkarn received the goods and subsequently sold them to the appellants, Messrs Cundy, who were bona fide purchasers for value with no knowledge of the fraud. When Lindsay & Co. did not receive payment, the fraud was discovered. Blenkarn was prosecuted and convicted. Lindsay & Co. then brought an action in conversion against Cundy to recover the goods or their value.

Issues

The central legal question was whether a contract, albeit a voidable one, had been formed between Lindsay & Co. and the rogue, Blenkarn. If a contract had been formed, title to the goods would have passed to Blenkarn. As such, Blenkarn could then have passed good title to Cundy, an innocent third-party purchaser. Conversely, if no contract was ever formed, title would not have passed from Lindsay & Co., meaning Blenkarn could not transfer title to Cundy, and Lindsay & Co. would remain the rightful owners of the goods. The case thus turned on the effect of a unilateral mistake as to the identity of a contracting party in a contract made at a distance.

Judgment

The House of Lords unanimously upheld the decision of the Court of Appeal, finding in favour of Lindsay & Co. The court held that no contract had been formed between Lindsay & Co. and Blenkarn. The reasoning was centred on the principle of consensus ad idem (a meeting of minds), which is essential for the formation of a valid contract. Lord Chancellor Cairns explained that Lindsay & Co. never had any intention of dealing with Blenkarn. Their offer was directed solely to the entity known as Blenkiron & Co. As Blenkiron & Co. knew nothing of the transaction, the offer was never accepted by the intended offeree. Therefore, no contract came into existence.

Lord Cairns articulated this position with clarity:

Of him [Blenkarn] they knew nothing, and of him they never thought. With him they never intended to deal. Their minds never, even for an instant of time rested upon him, and as between him and them there was no consensus of mind which could lead to any agreement or any contract whatever.

He further emphasised the absence of mutuality:

As between him and them there was merely the one side to a contract, where, in order to produce a contract, two sides would be required.

The court concluded that because no contract existed, ownership of the handkerchiefs never passed from Lindsay & Co. to Blenkarn. Consequently, Blenkarn had no title to transfer to Cundy. The legal principle of nemo dat quod non habet (‘no one can give what they do not have’) applied, and Cundy was required to return the goods or their value to Lindsay & Co.

Implications

The decision in Cundy v Lindsay is a foundational authority on the doctrine of unilateral mistake as to identity in contract law. It establishes that where a contract is made through correspondence (at a distance) and one party is mistaken as to the identity of the other party, and that identity is of fundamental importance, the contract is void ab initio (from the beginning). This is distinct from a mistake as to a party’s attributes (such as creditworthiness), which would typically render a contract voidable, not void. The key distinction is that a void contract is a complete nullity from the outset, meaning title cannot pass under it. A voidable contract, however, is valid until the mistaken party chooses to rescind it; in the interim, title can pass to an innocent third-party purchaser. This case is often contrasted with subsequent decisions involving face-to-face transactions, such as Phillips v Brooks Ltd [1919] 2 KB 243, where the law presumes an intention to contract with the person physically present, making the contract voidable for fraud, thus protecting the innocent third-party purchaser. Cundy v Lindsay remains the leading authority for contracts made at a distance where identity is crucial and mistaken.

Verdict: The House of Lords found in favour of the respondent, Lindsay & Co. The appeal was dismissed, affirming the judgment of the Court of Appeal that no contract was formed and Lindsay & Co. were entitled to the goods or their value from Cundy.

Source: Cundy v Lindsay (1878) 3 App Cas 459