MISTAKE AS TO COMMERCIAL EFFECT OF AGREEMENT NOT SUFFICIENT TO ENTITLE CLAIMANT TO SET IT ASIDE

Clarion Ltd v National Provident Institution [2000] 2 All ER 265

It is not an unknown occurrence for a contracting party to enter into a contract while labouring under a mistake as to the commercial effect of the contract which it has signed. Does the mistake entitle the mistaken party to set aside the contract? The answer recently given by Mr Justice Rimer in Clarion Ltd v National Provident Institution [2000] 2 All ER 265 is that it does not. Mr Justice Rimer emphasised that the equitable doctrine of mistake cannot be used in order to rescue a party from a bad bargain. He stated that ‘it is ordinarily no part of equity’s function to allow those who do make [bad] bargains to escape from them’. On the facts of the case the mistake which had been made related not to the subject matter of the contract but to the commercial effect of the agreement and it was held that this was not sufficient to entitle the claimant to set aside the contract which it had concluded.