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Ironically, I was using Amalgamated Investment & Property v. John Walker (AI&P) to teach the English law of frustration the day Great Peace Shipping (GPS) was decided. The judges in AI&P drew a sharp, if somewhat arbitrary, distinction between mistake and frustration. The one going to an existing fact, the other to a future event. The error was whether a property would be listed, which reduced its value from 1,710,000 to 200,000 pounds. At the time of the contract it was inevitable that the property would be listed -- a low-level official had set the ball in motion -- but it had not been officially done. On the surface the case is difficult to distinguish from Solle, where the mistake went to whether property under lease was rent controlled. I left the point hanging telling the students that English law seems to take a more generous approach to mistake than frustration.

In the United States, people usually collapse mistake, impossibility/impracticability, and frustration. If you come at it from the perspective of contract law this is easy to do for the question in every case is whether to discharge someone from his bargain because the world was not as he and the other expected. I was happy with this until I began to study the law of restitution where I learned that there is a sharp divide between mistake of existing fact and mistakes regarding the future. Outside contract (and in the case of mistaken performance of a contract), relief from the former is almost automatic while relief from the latter is rare. I'm not quite sure what to make of this.

Back to contract. Once you get beyond some obvious questions -- to determine whether a person bears a risk you ask whether it is assigned by the contract, whether it is assigned by a background rule of law (e.g, the rule on destruction of identified goods), and whether the risk was foreshadowed when the contract was made -- the law is a muddle in the US and in England. The so-called principles or tests in Treitel and Anson (Beatson) merely say that a contract will be relieved only if a change in the world has a great impact on the cost or value of performance, they do not say precisely how great nor why sometimes the law will not relieve someone from a great and unexpected loss.

This said it is easy to explain the result in most cases. In AI&P the risk was foreseeable and there may be a per se rule on sales of real estate because of the interest in finality. In GPS the real mistake may have been that the defendant was unaware one of its own ships was near the damaged vessel. He continued the charter after learning the plaintiff's vessel was further than they had thought, cancelling it only when his own vessel showed up on the scene.

-----Original Message-----

From: Duncan Sheehan
To: ENRICHMENT@LISTS.MCGILL.CA
Date: Thu, 17 Oct 2002 09:30:44 +0100
Subject: Re: [RDG:] Solle v. Butcher bites the dust

Dear all,

On the, I suspect, reasonable assumption that legislation will not be forthcoming in the near future, this is something that really must go further up to the House of Lords. I don't think we can just take the Court of Appeal's word for it. After 50 years and several Court of Appeal decisions (Nutt v Reed, Magee v Pennine Insurance, William Sindall v Cambridgeshire County Council) accepting Solle v Butcher, you have to wonder whether they are not being over-bold. That said, they cannot be faulted, on my first reading at least, for not developing their argument properly, whatever you may think of its merits.

Basically in a nutshell they argue that the circumstances in which a court of chancery would permit rescission of a contract for mistake was not clear in the C19. They take the example of Cooper v Phibbs and say that although the claimant probably thought he had no chance in a court of law, because his mistake was as to existence of his equitable rights, that Bell v Lever Bros confined its effect, and those of other C19 cases to situation where the contract was void at law, para 118. They go on to claim that we have never satisfactorily defined fundamental mistake in equity as anything different to at law, para 131, 153, and that if we want to give relief in more cases than we do at law at present that is a question for the relaxation of the common law rules, para 156. Effectively the CA argue that Denning LJ in Solle was trying to overrule the House of Lords! What he did was say that relief ought to be given in more cases than you are prepared to give it, but I'm going to instead.

While I take the point about the definition of the equitable jurisdiction being somewhat mysterious (I don't know what fundamental means either), you could say much the same about the common law test. Treitel has a neat test to do with the identity, as opposed to attributes of an object, but that like most tests doesn't seem to help. I don't know what it means at common law either. Not knowing what it means is a reason for finding a test that defines the ambit for relief satisfactorily, not abolishing equitable relief altogether. After all it does not seem obviously absurd to have some very very very serious mistakes making a contract void, merely serious mistakes making it voidable, and everything else just being a mess up you have to deal with. There are very good reasons why you might not wish to expand the ambit of complete avoidance and nullity, but rather make a contract voidable. Protection of third parties springs immediately to mind.

Duncan Sheehan