The doctrines of mistakes in English contract law allow for the possible voiding of contracts formed under false assumptions. The party intending to void the contract can file a suit on common, mutual and unilateral grounds of mistakes. Common mistake implies that both parties hold the same mistaken assumption when making the contract, while mutual mistake is when the parties are mutually mistaken about the subject matter (Stone & Devenney, 2022). A unilateral mistake is where one party is mistaken while the other party to the contract is sufficiently aware or has reason to be aware of the mistake. However, as currently interpreted, the doctrine of mistakes needs to be narrower in scope and more restrictive. This paper presents the merits and limitations of the doctrine of mistakes in accommodating fairness arguments regarding contracts formed under flawed assumptions.
Current Doctrines Interpreted Narrowly
Courts place a very high threshold for common mistakes to void a contract, making this doctrine extremely limited in practical cases. Courts also refuse possible rescission claims even when parties are mutually mistaken regarding critical facts underlying the contractual exchange, as depicted by the 1846 case of Raffles v Wichelhaus, where both parties to the contract were mistaken regarding the ship’s name.
Furthermore, courts only allow a contract to be voided due to unilateral mistakes in rare circumstances despite clear evidence that the non-mistaken party deliberately declined to clarify the error. The scope of consideration is also strictly limited to mistakes as to the subject matter, as decided in the 1950 case of Solle v Butcher. Hence, scenarios where one party fails to disclose their awareness of the other’s error often lead to enforceable contracts. Such strict rulings in favour of maintaining contracts contrast with principles of good faith and fair dealings (Stone & Devenney, 2022). Voiding more contracts formed under clearly flawed assumptions would align with common sense views of reasonable parties voluntarily entering agreements.
Counter Arguments to Doctrinal Expansion
Substantial risks are associated with drastically expanding the interpretation of the doctrine of mistakes. Voiding contracts under broader scenarios creates significant uncertainty in commercial dealings and market transactions, as held in Shogun Finance Ltd v Hudson (2003). The uncertainty could devastate the commercial stability of a country and shatter business investments and trade agreements that fundamentally rely on the certainty and validity of commercial contracts. Critics argue that narrow mistake principles incentivize proper diligence by parties when entering contracts rather than carelessness with the assumption of possible later rescission (Stone & Devenney, 2022). Broad interpretations of the doctrine of mistakes do little to promote certainty in commercial agreements.
Analysis
There are good arguments on both sides of the debate. While narrow judicial interpretations can produce some seemingly unfair case outcomes, expanding mistake rescission rights likely introduces impractical levels of uncertainty into commercial transactions. Reform advocates carry the persuasive burden of delineating workable limitations on broader mistake doctrines to prevent systematic market uncertainty (Stone & Devenney, 2022). Until such proposals are forthcoming, English courts are justified in their strict approach, erring on maintaining legal certainty in contractual dealings.
Conclusion
In conclusion, while the doctrines of mistake in English law are narrow and impede justice in certain instances, calls for substantially expanding the scope of interpretation understate legitimate countervailing issues related to contractual certainty. Some incremental doctrinal evolution may be warranted, but wholesale expansion appears imprudent given potential detrimental impacts on commerce. The burden rests with reform advocates to delineate workable bounds on mistake principles rather than merely criticizing courts for undue strictness. Courts are reasonably resistant to allowing broad interpretations of the doctrine of mistakes in the interest of certainty, stability, and predictability of commercial transactions.
References
Stone, R., & Devenney, J. (2022). The modern law of contract. Routledge.
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