1. The denial in The Great Peace of any equitable jurisdiction to set aside (rescind) a contract for common mistake as to quality

Until 2002 where a contract was entered into as a result of a common mistake which was not sufficiently fundamental at common law to render the contract void (i.e. mistakes as to quality), that contract might still be treated as voidable in equity and be set aside on terms. This possibility was recognized by the CA (the judgment of Denning LJ) in Solle v Butcher (1950) and allowed for great flexibility of remedy in such cases. However, in order to be voidable in equity the mistake needed to be ‘fundamental’ and it proved to be particularly difficult to justify the position that a mistake was not sufficiently fundamental at common law to render the contract void but could be sufficiently fundamental to set it aside in equity (Evans LJ in William Sindall plc v Cambridgeshire County Council (1994)).

A key debate is whether The Great Peace denial of such an equitable jurisdiction can be justified on a historical analysis and it is clearly unhelpful in terms of the flexibility of remedy.

Chandler, Devenney, and Poole, ‘Common Mistake: Theoretical Justification and Remedial Inflexibility’ [2004] JBL 34, and the New Zealand Contractual Mistakes Act 1977.

2. The legal treatment of ‘impossibility’

The effects of common mistake and frustration are very different although both operate in a general sense to excuse further performance.

•     Common mistake: the contract will be void for common mistake (at common law) but in very narrow circumstances, arguably based on there being a total failure of consideration; otherwise it seems that the contract remains valid. Where the contract is void (e.g. res extincta), each party hands back anything received under the void contract but there are no means of redressing any other financial consequences (compare the LR(FC)A 1943). There is also no possibility of recovering damages in pure mistake cases.

Revision tip

It is important to avoid any inappropriate reference to ‘damages’ in the context of common mistake and frustration.

It may be possible to justify such an ‘all or nothing’ conclusion based on the very limited circumstances in which operative common mistakes can occur and therefore the potentially limited impact on third parties. Equally, it would seem that a common mistake might be discovered quite quickly and before significant performance has occurred (see Tettenborn, ‘Agreements, Common Mistake and the Purpose of Contract’ (2011) 27 JCL 91, arguing that a mistake should not be raised once performance has begun). The same might not be true of frustration which can occur towards the end of a contract term where payment is due on completion.

•  Frustration (subsequent impossibility) discharges the contract for the future and there is a statutory adjustment of the parties’ positions regarding pre-frustration obligations in accordance with the LR(FC)A 1943 and Goff J’s interpretation of the Act as aimed at preventing unjust enrichment.

In practice, there can be very fine distinctions of timing and fact which distinguish the application of the doctrines, e.g. Amalgamated Investment & Property Co. Ltd v John Walker & Sons Ltd (1977): the operative date was taken to be the date of the listing of the property although the decision to list had, unknown to the parties, been taken before the date of the contract of purchase. Similar facts led to different outcomes based on timing in Krell v Henry (1903) (frustration) and Griffith v Brymer (1903) (mistake because unknown to both parties the decision to cancel the procession had already been taken).

3. The basis of the LR(FC)A 1943: whether s. 1(2) and (3) in fact operate to prevent unjust enrichment or whether the purpose of the Act should be to apportion losses

Haycroft and Waksman ‘Frustration and Restitution’ [1984] JBL 207, and McKendrick, ‘Frustration, Restitution and Loss Apportionment’ in Burrows (ed.), Essays on the Law of Restitution (Clarendon, 1991), argue that the aim of the Act should be the apportionment of losses. It is arguable that this may underpin the broad discretion in Gamerco v ICM (1995) (at least as far as this was a means to redress losses in the limited context of the s. 1(2) expenses proviso). It may follow that on this interpretation the benefit would not be the end product of the services but the services themselves.

See also the excellent discussion of this question in Morgan, Great Debates: Contract Law, 2nd edn (Palgrave Macmillan, 2015), Chapter 5.