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Учебный год 22-23 / W_W_BUCKLAND_AND_ARNOLD_D_McNAIR_ROMAN_LA

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206 OBLIGATIONS: GENERAL

English law treats mistake of the former kind as going to motive, and therefore as irrelevant for purposes of mistake, unless the mistake amounts to thinking that the subject-matter of the contract existed whereas in fact it did not. Perhaps a mistake common to both parties as to the identity of the subject-matter has the same effect. Of course mistake inducing consent may be very relevant if induced by the other party, whether fraudulently or innocently, but in either case the contract will become voidable, not void, and innocent third parties who have acquired goods by reason of the contract will be protected.

It still seems correct1 to say that a mistake of the second kind (i.e. one which excludes consent) is relevant only if the other party knew of the mistake, or perhaps if he ought to have known of it. If he did not know of the mistake then the parties are genuinely at cross purposes, and the view that the law takes of the resulting situation is that the Court must try to ascertain the sense of the contract, and for that purpose will ask what meaning would be given to it by a reasonable man. This may end in imposing upon the two parties a contract which is different from what either of them meant, but the method will usually work and will at any rate preserve almost all contracts from failing. However, in a few very exceptional cases the Court will find itself unable to give a clear and definite meaning to the contract because there is some latent ambiguity which cannot be resolved, even by the admission of oral evidence.2 But if a definite meaning can be given to the contract, then neither party will be allowed to slide away from it on the ground of mistake, unless his mistake was known to the other party.

There still remains the question what kind of mistake excluding consent will be treated as relevant, even when known to the other party. This question3 has never been

1

In spite of Mr T. H. Tylor's article in 11 Mod. L.R. pp. 257-268.

2

See, e.g., Raffles v. Wkhelhaus, ante, p. 202. 3 As is said on p. 199.

MISTAKE

2O7

properly worked out. Perhaps the majority of cases can be left to take care of themselves on the ground that they are comparatively unimportant or that mistakes as to some minor point in the contract would be very unlikely to be known to the other party. All one can say, for the moment, is that mistakes as to the identity of the other party or of the object of the contract, or as to the existence or nonexistence of some express term, have been declared to be relevant, and that probably a mistake known to the other party as to the price would also be considered relevant; but it seems unlikely that the Courts would go much further.

The non estfactum cases undoubtedly cause difficulties in formulating a law of mistake in contract; for in none of them was the party seeking to hold the mistaken party to the contract aware of his mistake, and yet in several of them he failed. I think that quite a fair defence can be made for some of these decisions and even for the decision in Carlisle and Cumberland Banking Co. v. Bragg.1 In all the cases in which effect has been given to the doctrine a fraudulent person has been careful not to bring the parties to the contract face to face, but to constitute himself a messenger of a document which he has induced the one party mistakenly to execute in favour of the other party. It may be thought that the law would have been better had the Court in Bragg's Case held that Bragg must pay for his carelessness in executing the guarantee, but there may also be some doubt whether it was altogether businesslike of the bank to act upon the supposed guarantee without communicating with Bragg. It is perhaps not unreasonable to say that a party who acts upon a document purporting to be signed by somebody not in his presence should take the risk of its turning out to be something other than it purports to be, and it is not unreasonable that some distinction should be made between negotiable instruments

1 [1911] 1 K.B. 489.

208 OBLIGATIONS: GENERAL

and other documents.1 However, there seems to be no good reason for extending the doctrine of non estfactum so as to cover the whole law ofmistake—which is what would happen if the one party's knowledge or ignorance of the other party's mistake were considered irrelevant.

It is when one comes to the application of these rules that one finds difficulties; in particular it is not always easy to know whether a party has mistaken the identity or only the attributes of the other party. The difficulty is all the more disturbing because the person really affected by the distinction is not usually the party mistaken, still less the other party to the contract, who has almost invariably been fraudulent, but a third party who has acquired goods innocently from a fraudulent buyer; and he is the person least likely to know anything about the distinction. In the circumstances it is not altogether surprising to find that the decision in Cundy v. Lindsay? which protected the mistaken party against the innocent third party, does not seem ever to have been followed, at any rate in England, in a case where a third party was affectecD Am I wrong in detecting both in the King's Norton Metal Co. v. Edridge^ and in Phillips v. BrooksJ> an obvious desire on the part of the judges to escape from the hideous logic of Cundy v.

Lindsay ?

This distinction between identity and attributes forms a natural bridge between English law and the Roman doctrine of error in substantia.

There seems to be no doubt that the English law of mistake makes no distinction between one attribute of a thing and another, and therefore it is of no use to single out one particular attribute as appertaining to the sub-

stance of the thing.

On

the other hand, as Dr Glan-

1 To decide otherwise

would

perhaps imply the acceptance of all

documents as bearer documents.

2 (1878), 3 App. Cas. 459.

3

But it was followed by the majority of the Court of Appeal in Ingram

v. Little [1961]

1 Q.B. 31.

 

4

(1897), 14

T.L.R. 98.

5 [1919] 2 K.B. 243.

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2O9

ville Williams has shown,1 identity is only determined by a combination of attributes; thus English law is in fact bound to take notice of attributes if they are so important as to determine identity. However, there is no doubt whatever that the English law of mistake always looks beyond the attributes to the resulting identity; but it would be quite possible for a law, while regarding a mistake as to identity as the only relevant mistake, to concentrate on the mistaken attributes which led to the mistake of identity, and if it did so, there might well be a tendency to say that any attributes which determined the substance of the thing were relevant even though they did not actually determine its identity. It is quite possible that this is the way the Roman jurists approached the problem of error in substantia.

Nevertheless the doctrine seems to us dangerous, and it is no great consolation to be told that in any case the Roman law of contract placed much greater emphasis than English law on actual consensus and left very little room for the notion of reliance on the other party's words and acts. In practice the two laws were probably not so far apart. Let us take for instance a case like Smith v. Hughes.2 English law lays emphasis upon two separate points: it says that in any case the contract would not be void against Smith if he did not know of the mistake, and secondly that even if he did know of the mistake, the mistake would be irrelevant unless it was as to a term of the contract, and not merely as to an attribute of the thing sold. As to the first point, the only definite rule we find in Roman law is that the mistake will not be relevant if it is clearly due to the mistaken party's own fault. That would cut out most of the cases; but further, the party alleging mistake would surely have had to prove his mistake. How could he do it to the satisfaction of the judge ? In most cases he would have to show that the price he had agreed to pay was intelligible

1 23 Can.B.R. p. 273.

2 (1871), L.R. 6 Q.B. 597, ante, p. 203.

210 OBLIGATIONS: GENERAL

upon the basis of the mistaken attribute, but not otherwise. But if he could prove so much, the inference would be almost inevitable in many cases that the other party knew or ought to have known of the mistake. There would still however remain some cases where one party could convince the judge that he had been mistaken, but not that the other party had known of his mistake; and in these cases Roman law would treat the contract as void, whilst English law would treat it as valid.

On the second point there is an undoubted difficulty: Roman law does not make any clear distinction between a mistake as to an attribute and a mistake as to a term, or, to put the distinction as it arose in Smith v. Hughes^ between a quality and a promised quality. As to this, two particular points may be made: the first is that the English distinction must be very difficult to draw in practice, and a judge or jury faced with evidence which seemed to point to a mere mistake as to an important attribute would be inclined to scent fraud if the other party had been aware of it, and would very probably take the short additional step of finding that the mistake went beyond the mere attribute and extended to an actual term of the contract—in other words, that the mistaken party thought, not merely that the thing he would get had a particular attribute, but that the other party was promising that attribute. The second point is that the Roman solution is very much in line with the Roman treatment of liability for secret defects of quality. If the rule is, as in English law, caveat emptor, then the corollary is that, leaving on one side the implied conditions in the Sale of Goods Act, I must bargain specially for every quality that I want the subject-matter of the contract to possess, and inevitably the only sort of mistake that will be relevant will be one that relates to whether I have successfully bargained for the quality or not. But in Roman law the position was quite different.

1 (I8 7 I),L . R . 6Q . B . 597.

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211

Whatever may have been the limits of the implied warranties of quality in classical law, the whole atmosphere of the contract of sale (which is alone in question in these cases) is one of good faith. A buyer is entitled to assume that a seller will deliver goods of proper quality, and of the kind which he is likely to want. No doubt the parties are entitled to overreach each other as regards price, but the whole atmosphere of the contract is against such overreaching in respect of the nature or quality of the goods. In these circumstances it would be unreasonable to place the requirements of mistake as high as in English law. One cannot go so far as to say that a buyer is always entitled to expect that the goods shall be of precisely the kind that he wants, but it will not be unreasonable to say that he can treat the sale as void if he was mistaken as to some very important quality.

For we must always remember that it is not every attribute that goes to the substance of a thing. Whatever the correct meaning to be given to the word 'substance*—and it is admitted on all hands that there is great obscurity here— it is quite clear that it must be something very important.

This juxtaposition of error in substantia and the liability for secret defects ofquality is not fanciful. In modern French law they are regularly confused, and in many cases where a buyer is unable, e.g. owing to lapse of time, to use his remedy for secret defects, and the defect proves to be serious enough to be considered one of substance, an attempt is made to treat the sale as voidable for error in substantia}

At first sight another difference seems to exist between Roman and English law, for although no criterion of substantia has been found to satisfy all critics, it seems at any rate to have had some connexion with the nature of the thing itself, which is the subject-matter of the contract. On the other hand there seems to be no reason why a contract should not be treated as void in English law,

1 52 L.^.R. 99.

212 OBLIGATIONS: GENERAL

owing to a mistake of one party known tQ the other, even though the mistake does not relate to the actual thing, but to some term in the contract not connected with the thing itself. It would seem then that the contract in Smith v. Hughes1 could, in Roman law, have been treated as void only if the judge was prepared to say that the goods had a substance different from that which they were supposed to have by the other party, whereas in English law the actual substance or quality of the goods seems irrelevant, and the only relevant consideration can be the existence or non-existence of a term in the contract. However, the difference is probably illusory, for Roman law treated mere passive acquiescence in the self-deception of the other party as do/us, and therefore a party could not have held the other party to a contract when he knew that that other party was mistaken as to the existence or nonexistence of a term. Undoubtedly the presence of dolus would have made the contract not void, but voidable, but the Roman texts afford us no example of a case comparable to Cundy v. Lindsay2 in which the rights of an innocent third party are at stake.

It seems that the text is correct3 when it says that before the Judicature Acts a Court of Equity would have rescinded a contract on grounds of mistake in circumstances in which a common law Court would not have treated the mistake as making a contract void; and further that the common law Courts had taken over a good deal of the jurisdiction before those Acts came into force. It has recently been suggested in the very remarkable case of Solle v. Butcher* that this development, which involved declaring contracts void ab initio which would have better been rescinded, was unfortunate, and that now that all judges of the High Court have power to award both common law and equitable remedies, this particular development should be forgotten, and we should return to the

1

(1871), L.R. 6 Q.B. 597.

2

(1878), 3 App. Cas. 459.

3

See pp. 201-202, ante,

4

[1950] 1 K.B. 671.

MISTAKE

2 1 3

practice ofawarding only equitable remedies in cases which would have been dealt with in equity before the middle of the nineteenth century. This would have the further advantage of allowing the Court in a very large number of cases to grant rescission to the plaintiff only on terms.1

There is much to be said for the view that all cases of mistake should be subjected to the discretionary action of the judge, at any rate all the cases in which the two parties to the action are innocent. In the nature of things mistakes of this kind are very hard to guard against, and parties do not draft their agreements on the faith of a settled law of mistake, which would be disturbed by discretionary action. In almost every case where both parties are innocent it is at present largely a matter of chance which of them succeeds; and success does not always come to the more innocent or more careful party. Whether the suggested procedure could be made to apply to all cases of mistake where both parties are innocent, may be a matter of some doubt. There would probably always be a hard residue of cases which would have to be decided at common law, and would receive the rough justice which is all that common law can give.

So far there are very few instances from which one could conjecture the terms that a Court of Equity would impose as a condition of rescission; relief seems to be modelled very closely on that granted for innocent misrepresentation, from which no doubt mistake is not easily distinguishable in respect of the treatment it receives from equity. It would be very interesting to see whether cases arising out of mistakes as to the identity or attributes of the parties could be thrown into equity, and if so whether, in a proper case, a Court would feel itself at liberty to apportion the damage caused by a guilty third person between the two parties to the suit.2

1 The terms offered to the plaintiff in SoIIe v. Butcher were of a very complicated nature. 2 Common law principles were applied by the Court of Appeal in Ingram v. Little [1961] 1 Q.B. 31, a case of mistake of identity/and the contract was held to be void.

214 OBLIGATIONS: GENERAL

3. POSITION OF THIRD PARTIES

Both the Roman and the English law have the principle that a third party cannot be liable or entitled under a contract, and the Roman law had not the conception of agency, which lessens the field of application of the rule in our law. But both systems have found the rule inconvenient, at least as to the acquisition of rights by third parties, and have circumvented it in different ways. In Roman law the method is not systematic: an equitable action {actio utilis) was given to the third party in a number of cases in which justice or convenience seemed to require it. We do not know how the action was formulated—in many cases it is later than the abolition of the formulary system—but the fact that it is an equitable action and not a direct action on the contract shows that it is in no way meant to break with the principle that third parties cannot acquire rights under contracts. In our system the trust principle is invoked with very similar results. Where the Court thinks that justice requires that third parties should have a remedy it constructs a trust in their favour, even though the parties to the contract have not used the language usually associated with trusts; but it must be admitted that the occasions on which the Courts have been willing to do this have been very rare. In the United States a different road has been followed. Disapproval has been expressed with our way of dealing with the matter: the trust, it is said, is a figment, and we are in fact giving rights to third parties under the contract, but in an unnecessarily clumsy way.1 American Courts prefer not to use this device (though at least one jurisdiction resorts to 'equity procedure* for the purpose), but to say that there are cases in which a third party can acquire rights under the contract. It is however clear that the rule cannot be that in every case in which a third party is an intended

1 See, e.g., Corbin, 46 L.Q.R. (1930) pp. 12 sqq.

POSITION OF THIRD PARTIES

2l £

beneficiary he will have an action. That would do great injustice, e.g., where nothing has been actually done or communicated to the third party and the contracting parties wish to vary or revoke their agreement. Indeed, as Professor Corbin says:1 'it cannot be said that the exact limits within which the rule is to be applied have been clearly established; these limits are in process of establishment as new cases arise.' That is perhaps to understate the matter: it is difficult to find a principle in the American cases, so far as they have gone. The American method seems on the whole less logical, for our view recognises the fact that the relation is unilateral: the third party is in no sense a party to the contract. He is not in any way bound by it, though it may well be that some act of his is a condition on his obtaining the rights. The doctrine which constructs a trust in proper cases seems more elegans in the Roman sense. It is also more elastic: it gives thejudge a very free hand. It is for him to decide whether he thinks on the facts of the case, which are infinitely variable, that a trust should be constructed.2 A rule dealing with the matter as one of pure contract, as is proposed in the ' Restatement' of the American Law Institute, may not be so easily manipulated. This may be an advantage; at any rate it is a difference.

The Roman law seems to have started on lines somewhat similar to our own. Breach of faith in deposit was an actionable wrong long before the conception of deposit as a contract had been reached ;3 and it is noticeable that the

1At p. 13.

2Unfortunately one cannot now take so optimistic a view as that expressed above. The Courts seem strangely loath to imply a trust except where there is a very definite custom in favour of using documents purporting to create third-party rights. On the other hand, it may reasonably be said that, owing to the existence of the trust, and of other institutions unknown to Continental law, the field within which third-party rights

have a chance of performing a useful function is much narrower here.

3 Coll. 10. 7. 11, from P. Sent., 'lege duodecim tabularum\ It is perhaps worth while to note the helpful part played by Deceit in the efforts of the common law to develop assumpsit. For dolus generally, see pp. 383 sqq.,post.

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