Contract Mistakes in UK Law

Corresponding to mistake as to the existence of the subject matter is mistake as to title in cases where unknown to the parties the buyer is already the owner of that which the seller purports to sell to him. To such a case Lord Westbury applied the principle that if parties contract under a mutual mistake and misapprehension as to their relative and respective rights the result is that the agreement is liable to be set aside as having proceeded upon a common mistake.

They can be supported on the ground that it is of paramount importance that contracts should be observed: and that if parties honestly comply with the essentials of the formation of contratcs, i.e., agree in the same terms on the same subject matter, they are bound: and must rely on the stipulations of the contract for protection from the effect of facts unknown to them.

"In the contemplation of both parties fundamental to the continued validity of the contract," "a foundation essential to its existence," "a fundamental reason for making it" are phrases found in the important judgment of Scrutton L.J. in the present case. Nothing is more dangerous than to allow oneself liberty to construct for the parties contracts which they have not in terms made by importing implications which would appear to make the contract more businesslike or more just.

The general rule at common law is that if one party has made a mistake as to the terms of the contract and that mistake is known to the other party, then the contract is not binding. The reasoning is that although the parties appear, objectively, to have agreed terms, it is clear that they are not in agreement. Some of the cases talk of such a contract being “void”, but I think it is clearer to say that there was never a contract at all.

Rectification is concerned with contracts and documents, not with intentions. In order to got rectification, it is necessary to show that the parties were in complete agreement on the terms of their contract, but by an error wrote them down wrongly; and in this regard, in order to ascertain the terms of their contract, you do not look into the inner minds of the parties – into their intentions – any more than you do in the formation of any other contract.