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Dear all,

I wonder whether the answer to Mark Gergen's half question on mispredictions is not something like this. I do offer this very tentatively in the expectation that there may be a big hole somewhere in the theory.

In the case of a mistaken payment you have a belief in something that at the time you make the payment is not the case. Your intention is flawed or vitiated, call it what you will, and therefore you can recover. However, a misprediction applies to something that was not independently falsifiable at the time you acted, but only subsequently. You have done what you set out to do and it later turns out to be a bad idea, and as we see from Clarion v National Provident Institution that type of 'mistake' does not count in contract cases either.

In a contractual case where you make a mistake you make the contract believing something to be true that isn't. You have to protect other parties' expectations, but subject to how we do that relief is available, at least sometimes. Where frustration operates you make the contract and it later turns out to be more onerous than you thought in such a way that the contract is terminated de futuro, you are still performing it. The, at least tacit, misprediction that you made when you enter the contract that these events would not happen does affect the performance in the same way as a mistake does. To that extent when the Court of Appeal in Great Peace Shipping v Tsavliris drew the doctrines of mistake and frustration closer together they were right to do so, and the US position makes sense.

A misprediction where the contract is completely executed will not count, or at least I cannot immediately think when it might. It will certainly be as rare as mispredictions counting in restitution. It will be rare for the same reason; in both cases you have completed what you wanted; the misprediction does not affect your actions.

I think what this amounts to is saying that frustration in contract represents a special type of misprediction that works, but does not affect the general rule that mispredictions do not count.

If you think you can shoot this one down, please do.

Duncan Sheehan

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

From: Enrichment - Restitution & Unjust Enrichment Legal Issues
[mailto:ENRICHMENT@LISTS.MCGILL.CA]On Behalf Of Gergen
Sent: Thursday, October 17, 2002 10:44 AM
To: ENRICHMENT@LISTS.MCGILL.CA
Subject: Re: [RDG:] Solle v. Butcher bites the dust

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.