Mistake in Law - page 2
Keywords: Mistake Law cases terms high graded
By sammy14 on 30/06/2007
Level: Bachelor Honours Degree (BA, BEng, BSc etc)
Page Number: 2 of 5 pages: 1 2 3 4 5
amount as operative and hence, make a contract void. This is because neither party to the contract would contract for something that did not exist. In Couturier v Hastie for example, the contract was for the buying and selling of a cargo of grains which both of the parties believed to have existed at the time of contracting. The goods were in fact sold as was a customary practise when they began to overheat, and thus the goods were in effect non existent from that moment on for the two contracting parties. The contract was like this declared to be void by the courts. The principles established in this case apply to specific goods and not to those of speculative nature.
Furthermore, when it is unknown to either party at the time the contract is formed that the goods have ‘commercially perished’ then this too can amount to an operative mistake, resulting in the contract being void. This is what happened in Burrow Lane and Ballard Ltd v Phillip Phillips & Co Ltd where a seller, without ever checking the 700 bags of groundnuts that he bought had sold them on. The buyer of these refused to pay after finding out that 109 bags had been stolen. The seller was unsuccessful in first suing the owner of the warehouse; who had by this time become insolvent, and secondly, in suing the buyer for the price. The courts held that the goods in commercial terms had ceased to exist and the contract was void.
Modern commercial transactions can still adopt the classical operation of the principle of res extincta (subject matter does not exist) for example, in the case Associated Japanese Bank (international) Ltd v Credit du Nord SA where here an arrangement concerning the sale and leaseback for four packaging machines was finalised between the bank and a man called Bennett. Bennett’s obligation under the contract was guaranteed by Credit du Nord. The machines did not in fact exist and the bank was unable to sue Bennett when he was declared bankrupt. However, they did sue on the guarantee. It was held by Steyn J that the guarantee was subject to a condition procedure that the machines existed at the time the contract was formed. The test used in Bell v Lever Brothers Ltd was used here that for the mistake as to the existence of the subject matter to be operative
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