1. Outline the differences between the doctrines of misrepresentation and common law mistake.
### Introduction
The doctrines of misrepresentation and common law mistake both concern defects in the formation of a contract. They are known as vitiating factors, meaning they can spoil the validity of a contract. Both relate to a flaw in the parties’ understanding before they bound themselves to an agreement. However, despite this shared purpose, they are distinct doctrines with different foundations, requirements and legal consequences. This essay will outline the key differences between misrepresentation and common law mistake. The primary differences can be seen in three main areas: first, the source and nature of the error; second, the effect of the doctrine on the contract’s status; and third, the remedies available to the wronged party.
### 1. The Nature of the Doctrines
A core difference is the nature of the doctrines and what they seek to police.
a. **Misrepresentation**
Misrepresentation is based on information provided between the parties. It is a false statement of fact made by one contracting party to the other, which induces the other party to enter into the contract (McKendrick, 2020). For a misrepresentation to be actionable, several elements must be present:
i. A statement of fact must be made. This is distinguished from a statement of opinion, as in *Bisset v Wilkinson* [1927] AC 177, where a statement about the sheep-holding capacity of land was deemed an opinion and not actionable.
ii. The statement must be false.
iii. The statement must have induced the claimant to enter into the contract, as shown in *Edgington v Fitzmaurice* (1885) 29 Ch D 459.
The doctrine is therefore concerned with one party actively or passively misleading another through a positive assertion.
b. **Common Law Mistake**
Common law mistake, by contrast, is not typically concerned with statements made between parties. It operates where both parties enter into a contract under a shared and fundamental misapprehension about the facts. The mistake is internal to the parties’ thinking, not based on an external communication from one to the other. The doctrine operates in very narrow circumstances, as established in *Bell v Lever Bros Ltd* [1932] AC 161. The House of Lords held that for a mistake to void a contract, it must be a mistake of both parties, and it must be as to “the existence of some quality which makes the thing without the quality essentially different from the thing as it was believed to be”.
### 2. The Source of the Error
The second point of difference follows from the first, and relates to where the error originates.
i. **Misrepresentation Source**
In a misrepresentation claim, the source of the claimant’s error is a statement made by the defendant. The fault lies with the representor for creating the false impression. The law of misrepresentation is therefore designed to protect a party from being induced into a contract by another’s false words or conduct.
ii. **Mistake Source**
In a common law mistake scenario, there is no ‘guilty’ party in the same sense. Both parties are equally mistaken. The source of the error is a shared, incorrect assumption about a fundamental state of affairs. For example, in *Couturier v Hastie* (1856) 5 HLC 673, both parties were unaware that the cargo of corn they were contracting over had already perished. Their agreement was based on a mistaken assumption held by them both, not on a statement made by one to the other.
### 3. The Effect on the Contract
A major practical difference between the two doctrines is their effect on the legal status of the contract.
i. **Misrepresentation: Voidable**
A contract affected by a misrepresentation is ‘voidable’. This means the contract is valid and binding unless and until the innocent party chooses to set it aside (a process called rescission). The innocent party has a choice: they can either rescind the contract or they can choose to affirm it and continue with their obligations. This flexibility is a key feature.
ii. **Common Law Mistake: Void**
A contract founded on an operative common law mistake is ‘void ab initio’, meaning it is a complete nullity from the very beginning. It is treated as if it never existed. There is no choice to affirm; the law simply does not recognise the contract’s existence. This is a much more drastic and absolute outcome. As confirmed in *Great Peace Shipping Ltd v Tsavliris Salvage (International) Ltd* [2002] EWCA Civ 1407, the test for common mistake at common law remains very strict, and if it is satisfied, the contract is automatically void.
This has important consequences for third parties. If a contract is void for mistake, any goods passed under it must be returned to the original owner, even from an innocent third-party purchaser, as no title could ever pass. If a contract is merely voidable for misrepresentation, an innocent third party who acquires the goods for value before the contract is rescinded can keep the goods.
### 4. The Available Remedies
The final and perhaps most significant difference is the range of remedies available.
i. **Misrepresentation Remedies**
The law of misrepresentation provides a flexible range of remedies.
a. **Rescission:** The primary remedy, which aims to restore the parties to their pre-contractual positions.
b. **Damages:** This is a crucial remedy not available for mistake. The ability to claim damages, and the basis for the calculation, depends on the type of misrepresentation:
– Fraudulent Misrepresentation: Damages available in the tort of deceit.
– Negligent Misrepresentation: Damages available under the Misrepresentation Act 1967, s 2(1). This is a powerful provision, as it reverses the burden of proof.
– Innocent Misrepresentation: Rescission is the main remedy, but a court has discretion under the Misrepresentation Act 1967, s 2(2) to award damages in lieu of rescission.
ii. **Common Law Mistake Remedies**
The remedies for common law mistake are extremely limited.
a. The sole effect is that the contract is declared void.
b. There is no remedy of damages in common law for a party who entered a contract on the basis of a common mistake. The outcome is “all or nothing” (Poole, 2021). The more flexible equitable doctrine of mistake that once existed (*Solle v Butcher* [1950] 1 KB 671) was effectively abolished by the Court of Appeal in *Great Peace Shipping*, leaving only the harsh, narrow common law rule.
### Conclusion
In summary, while both misrepresentation and common law mistake address situations where a party’s consent to a contract is defective, they are fundamentally different doctrines. Misrepresentation is concerned with a false statement from one party to another that induces a contract, rendering it voidable and giving access to a wide range of remedies including rescission and damages. Common law mistake, on the other hand, deals with a shared, fundamental misapprehension held by both parties, which is not based on a statement. Its scope is extremely narrow, and if established, its only effect is to render the contract void from the outset, with no possibility of damages. Consequently, claimants will almost always prefer to frame their case in misrepresentation if the facts allow, due to its greater flexibility and more favourable remedies.
References
Cases
- Bell v Lever Bros Ltd [1932] AC 161
- Bisset v Wilkinson [1927] AC 177
- Couturier v Hastie (1856) 5 HLC 673
- Edgington v Fitzmaurice (1885) 29 Ch D 459
- Great Peace Shipping Ltd v Tsavliris Salvage (International) Ltd [2002] EWCA Civ 1407
- Solle v Butcher [1950] 1 KB 671
Legislation
- Misrepresentation Act 1967
Books
- McKendrick, E. (2020) Contract Law: Text, Cases, and Materials. 9th edn. Oxford University Press.
- Poole, J. (2021) Textbook on Contract Law. 15th edn. Oxford University Press.
