Lloyd's Maritime and Commercial Law Quarterly
“EQUITABLE” MISTAKE REPUDIATED: THE DEMISE OF SOLLE v. BUTCHER?
The Great Peace
The judgment of the Court of Appeal in The Great Peace
1
will be applauded by practitioners who crave the predictability engendered by judicial commitment to pacta sunt servanda
or “sanctity of contract”. It revisits a topic which is perhaps more often encountered in classrooms than in courtrooms: when should a party be entitled to escape contractual responsibility purely because of a mistake which was not induced by the other contracting party? English common law has always robustly insisted that the answer is “hardly ever”.
Orthodox analysis insists on putting the cases on contractual mistake into hermetically sealed sub-compartments. First, cases of mistakes as to the identity of the other contracting party.2
Secondly, cases where the parties are at cross-purposes as to what the subject-matter of the contract is.3
Thirdly, cases of unilateral mistakes as to the governing terms.4
Fourthly, shared mistakes as to the subject-matter. We are concerned with the last sub-category. The narrow approach of the common law is said to be that a contract is void where the subject-matter no longer exists at the time of formation (res extincta
5
) and where the subject-matter already belongs to the party who believes that he is acquiring under that contract (res sua
6
). Otherwise, where the mistake is merely as to some quality of the subject-matter, the party seeking to escape must demonstrate that the mistake is shared by both parties and that it renders the subject-matter “essentially different” from what the parties supposed it to be. Despite the metaphysical air of the second limb of the test, this narrow approach was at least thought to engender predictability, which was to some extent made more concrete by Lord Atkin’s famous four examples of contracts not
1. Great Peace Shipping Ltd
v. Tsavliris Salvage (International) Ltd (The Great Peace and the Cape Providence)
[2002] EWCA Civ. 1407 (C.A.: Lord Phillips of Worth Matravers, M.R., May and Laws, L.JJ.). The court affirmed the first instance decision of Toulson, J. (9 November 2001) Unreported, although briefly reported in (2001) 151 N.L.J. 1696 and noted by J. Cartwright (2002) 118 L.Q.R. 196.
2. For a recent reconsideration see Shogun Finance Ltd
v. Hudson
[2001] EWCA Civ. 1000; [2002] 2 W.L.R. 867, currently on appeal to the House of Lords.
3. Usually illustrated by reference to Raffles
v. Wichelhaus
(1864) 2 H & C 906; 159 E.R. 375 (two ships “Peerless
”), discussed by the Court of Appeal at paras [28–29].
4. Usually illustrated by Smith
v. Hughes
(1871) L.R. 6 Q.B. 597 (“old oats and new oats”).
5. Usually illustrated by Couturier
v. Hastie
(1856) 5 H.L. Cas. 673, which was supposedly codified as s.6 of the Sale of Goods Act 1893 (now the 1979 Act).
6. Usually illustrated by reference to Cooper
v. Phibbs
(1867) L.R. 2 H.L. 149; and see P. Matthews, “A Note on Cooper
v. Phibbs
” (1989) 105 L.Q.R. 599.
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