Common Mistake CASES

In English law, a common mistake occurs when both parties to a contract share the same mistaken belief about a fundamental fact, potentially rendering the contract void. The threshold is high and the courts apply the doctrine narrowly.

Definition and principles

Common mistake arises when both parties enter into a contract based on an incorrect assumption that significantly affects the substance of the agreement. If the mistake undermines the very basis on which the parties contracted, the court may treat the contract as void.

Types of common mistake

• Res extincta: mistake as to the existence of the subject matter (for example, the item contracted for has already been destroyed).
• Res sua: mistake as to ownership, where one party already owns the subject matter of the contract.
• Mistake as to quality: rarely renders a contract void; it will only do so where the mistake makes the subject matter fundamentally different from what was agreed.

Case example: Lever Bros Ltd v Bell (1931)

In Lever Bros Ltd v Bell, the House of Lords held that a mistake about the quality or value of the subject matter does not render a contract void unless it goes to the root of the agreement. The employees’ undisclosed breaches were not enough to make the agreement fundamentally different from what the parties had contemplated.

Consequences of common mistake

Where a contract is void for common mistake, it is treated as having had no legal effect and the parties are restored, so far as possible, to their pre-contract positions. In practice, courts are slow to reach this conclusion and will generally favour the contract’s enforceability.

Criticism and limitations

Common mistake has been criticised as restrictive and uncertain, particularly as to what qualifies as a “fundamental” mistake. Courts approach such claims cautiously, with an emphasis on commercial certainty and stability.