Page 58 - DMGT102_MERCANTILE_LAWS_I

Mercantile Laws-I

Notes
Example:
(i) A, who owns two fiat cars, offers to sell his ‘White fi at’ for ` 80,000. B accepts the offer

thinking A is selling his ‘Brown Fiat’. There is a mistake as to the identity of the subject
matter.
(ii) P wrote to H inquiring the price of rifle of a particular make and suggested that he might

buy as many as 30. On receipt of the information he telegraphed, “send three rifl es”. But
because of the mistake of the telegraph authorities the message transmitted was “send the
rifl es”. H dispatched 30 rifl es. Held, there was no contract between the parties who were
labouring under a mistake as to the quantity of the subject matter (Henkel v. Pape (1870)
6 Ex.7).
(iii) Where a contract of lease of a house was agreed to at a lease amount of ` 2300 but in the
written agreement the figure 3200 was inserted by mistake the contract was held to be

void.
An erroneous opinion, however, as to the value of thing which forms the subject matter of the
agreement is not to be deemed a mistake as to a matter of fact.

Example: A buys an article thinking it is worth ` 10,000 while it is actually worth ` 5,000
only. Later he wants to avoid the agreement on the ground of mistake as to the price of the subject
matter. The agreement cannot be avoided on the ground of mistake. It is only erroneous opinion
as to the value of the subject matter and is not deemed a mistake as to a matter of fact.

4.7 Meaning and Effect of ‘Unilateral Mistake’

There is a unilateral mistake where only one party to a contract is under a mistake as to a matter
of fact. Generally speaking, such a contract is not invalid. Thus, where a person due to his own
negligence or lack of reasonable care does not ascertain what he is contracting about, he must
bear the consequences.

Example: A sold rice to B by sample, and B thinking that they were old rice, purchased
them. In fact, the rice were new. B cannot avoid the contract.
Exceptional cases in which agreement is void even when there is a unilateral mistake.
Firstly, where the unilateral mistake is as to the nature of the contract. Thus, in Foster v. Mackinnon
(1869) LR 4 C.P. 704 an old illiterate man was made to sign a bill of exchange by means of a
false representation that it was a guarantee. Held, the contract was void. The old man did not
intend to enter into the contract relating to bill of exchange but through the fault of another and
without any fault of his own made a mistake as to the nature of the contract. Secondly, where
the unilateral mistake is as to the identity of the person contracted with. Where A intends to
contract with B but by mistake enters into a contract with C believing him to be B, the contract is
void. In Cundy v. Lindsay and Co. (1878) 3 App. Cas. 459, one Blenkarn, knowing that Blenkiron
& Co. were the reputed customers of Lindsay & Co. ordered some goods from Lindsay & Co.
by imitating the signature of Blenkiran. These goods were then sold by Blenkarn to Cundy, an
innocent purchaser. In a suit by Lindsay & Co. against Cundy for recovery of goods it was held
that as Lindsay & Co. never intended to contract with Blenkarn there was no contract between
them and as such even an innocent purchaser of the goods from Blenkarn did not get a good
title and must return them or pay their price to Lindsay & Co. Similarly, in Lake v Simmons (1927)
A.C.487, a lady X induced Y to deliver possession of two pearl necklaces falsely representing that
she was the wife of baron Z and that she wanted them to be shown to her husband for approval.
Held, Y intended to contract only with the wife of the baron and not with X herself. Hence the
contract was void and X could not convey any title even to a bona fi de buyer.

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