Results of the material fact. of conveyancers, as a contract to transfer an existing lease for three lives, not necessarily a lease for three lives all existing. If in any state of things otherwise resembling those just now where only discussed we find, instead of ignorance of the material fact on one party is ignorant both sides, ignorance on the one side and knowledge on the other, then the matter has to be treated differently. Suppose A. and B. are the contracting parties; and let us denote by X. a fact or state of facts materially connected with the subject-matter of the contract, which is supposed by A. to exist, but which in truth does not exist, and is known by B. not to exist. Then we have to ask these questions. 1. Does A. intend to contract only on the supposition that X. exists? which may be put in another way thus: If A's attention were called to the possibility of his belief in the existence of X. being erroneous, would he require the contract to be made conditional on the existence of X. ? 2. If so-Does B. know that A. supposes X. to exist? 3. If B. knows this-Does he also know that A. intends to contract only on that supposition? If the answer to any one of these questions is in the negative, it seems there is a binding contract (a). But it is to be observed that a negative answer to the second question will generally require strong evidence to establish it, and that if this question be answered in the affirmative, an affirmative answer to the third question will often follow by an almost irresistible inference. Thus if a purchaser of a reversionary interest subject to prior life interests knows that one of these has ceased, and nothing is said about it at the time of the contract, then the purchaser can hardly expect anybody to believe either that he himself overlooked the material importance of that fact, or that he was not aware of the vendor's ignorance of it, or that he supposed that the vendor would not treat it as material (b). So in the case already cited (c) of the sale of shares after a petition for the winding up of the company had been presented it seems that a distinct allegation in the pleadings that the seller knew of the buyer's ignorance of that fact would have been sufficient to constitute a charge of fraud. (a) Smith v. Hughes, L. R. 6 Q. B. 597, supra, p. 395. (b) See Turner v. Harvey, Jac. 169. (c) Bowman v. Rudge, L. R. 3 Q. B. 689. If the questions above stated be all answered in the affirmative, either by positive proof or by probable and uncontradicted presumption from the circumstances, then it may be considered either that the case becomes one of fraud, or at least that the party who knew the true state of the facts, and also knew the other party's intention to contract only with reference to a supposed different state of facts, is precluded from denying that he understood the contract in the same sense as that other, namely as conditional on the existence of the supposed state of facts. mental error pro On a similar principle (as we have already mentioned inci Fundadentally) it is certain that where fundamental error of one party is caused by a fraudulent misrepresentation, and probable that duced by where it is caused by an innocent misrepresentation on the part sentation. misrepre of the other, that other is estopped from denying the validity of the transaction if the party who has been misled thinks fit to affirm it. Does it follow that the contract is in its inception not void, but voidable at the option of the party misled? Not so: for the fraud or negligence of the other must not put him in any worse position as regards third persons. These, if the transaction be simply voidable, are entitled to treat it as valid until rescinded, and may acquire indefeasible rights under it if it be void they can acquire none, however blameless their own part in the matter may be (a). Thus there is a real difference between a contract voidable at the option of one party and a void agreement whose nullity the other is estopped as against him from asserting. In the case of contracts to take shares in companies. an anomaly is admitted, as we have seen, for reasons of special necessity and the contract is treated as at most voidable. But even here there must be an original animus contrahendi to this extent, that the shareholder was minded to have shares in some company. An application for shares signed in absolute ignorance of its true nature and contents, like the bill in Foster v. Mackinnon (a), could not be the foundation of a binding contract to take shares. An allotment in answer to such application would be a mere proposal, and whether it were accepted or not would have to be determined by the ordinary rules of law in that behalf (see Ch. I). (a) Foster v. Mackinnon, L. R. 4 C. P. 704, supra, p. 375. Rule in r. Hickson We may finally call attention to a rule of the law concerning Heilbutt sales by sample which has some analogy to the rules governing as to sale this last class of void agreements. The rule in question may by sample. be gathered (as Mr. Benjamin has pointed out) from Heilbutt v. Hickson (a) and is to this effect: "If a manufacturer agrees to furnish goods according to sample, the sample is to be considered as if free from any secret defect of manufacture not discoverable on inspection and unknown to both parties." Rights and remedies of party Here we have a common error as to a material fact, namely the character of the sample itself by which the character of the bulk is to be tested. But it is possible to put the parties in the same position as if their erroneous assumption had been correct, and therefore their contract, instead of being avoided, is upheld according to their true intention, i.e. as if the sample had been what they both supposed it to be. If they had themselves discovered the mistake in time they would have made the same contract with reference to a proper sample in place of the defective one. The result is thus the converse of that which occurs when the error goes to the matter of the whole agreement, as in the cases we have been considering. It appears from the authorities which have been adduced that one who has been party to an apparent agreement which is void to a void by reason of fundamental error has several courses open to him. He may avoid the transaction, or rather assert its nullity from the beginning, in several ways. agreement. A. As defendant at law when the other party seeks to enforce an alleged executory agreement. And this, it seems in principle, and the authorities warrant us in saying, was properly done under the forms of Common Law procedure by a general traverse (b) rather than by special pleading (c). That is, the (a) L. R. 7 C. P. 438; Benjamin on Sale, 533. (b) E.g., Foster v. Mackinnon, L. R. 4 C. P. 704 (but where, as in this case, there is also a question of fraud, a special plea of fraud was properly added). Mitchell v. Lapage, Holt N. P. 253. Thornton v. Kempster, 5 Taunt. 786. (c) In Raffles v. Wichelhaus, 2 H. & C. 906, 33 L. J. Ex. 160, the facts shewing that there was no contract were specially pleaded. Qu. if this was necessary. See Perez v. Oleaga, 11 Ex. 506, 25 L. J. Ex. 65, where the Court, disallowing an equitable plea founded on a clerk's mistake in reducing a contract to writing in the Spanish language, suggested that the facts might be a good defence under a plea denying the contract. defendant says, not that there was a contract which for some special reason is voidable at his option, but that the alleged agreement never had any existence. B. As plaintiff at law, when he has actually paid money as in performance of a supposed valid agreement, and in ignorance of the facts which exclude the reality of such agreement. He may recover back his money so paid by the action for money received (a), just as he might have resisted paying it by a simple traverse of the alleged agreement: here he asserts that there was a total absence of consideration for the payment: he paid on the supposition that he was discharging an obligation, whereas there was in truth no obligation to be discharged. c. As defendant in equity resisting enforcement of any equitable right claimed under the transaction (b). D. As plaintiff in equity seeking to have the transaction. declared void and to be relieved from any possible claims in respect thereof (V). ment. On the other hand, although he is entitled to treat the Election supposed agreement as void, and is not as a rule prejudiced by to adopt originally anything he may have done in ignorance of the true state of the void agreefacts, yet after that state of facts has come to his knowledge he may nevertheless elect to treat the agreement as subsisting or, as it would be more correct to say, he may carry into execution by the light of correct knowledge the former intention which was frustrated by want of the elements necessary to the formation of any valid agreement. It is not that he confirms the original transaction (except in a case where there is also misrepresentation, see p. 403), for there is nothing to confirm, but he enters into a new one. And if his true consent goes with this, he is of course bound, so far as consent can bind him. It might be thought to follow that in cases within the Statute of Frauds or any other statute requiring certain forms to be observed, we must look not to the original void and improperly (a) E.g., Cox v. Prentice, 3 M. & S. 348. (b) E.g., the cross suits of Vorley v. Cooke, Cooke v. Vorley, 1 Giff. 230. Before the Judicature Acts a court of equity would not set aside a deed at the instance of a defendant. An original or cross suit had to be instituted for the purpose: Jacobs v. Richards, 18 Beav. 300. It is con- Mistake in intention: occurs in so-called agreement, but to the subsequent election or confirmation in which the only real agreement is to be found, to see if the requirements of the statute have been complied with. No express authority has been met with on this point. But analogy is in favour of a deliberate adoption of the form already observed being held sufficient for the purpose of the new contract (~). PART 3. MISTAKE IN EXPRESSING TRUE CONSENT. This occurs when persons desiring to express an intention expressing which when expressed carries with it legal consequences have generally by mistake used terms which do not accurately represent their writing. real intention. As a rule it can occur only when the intention is expressed in writing. It is not impossible to imagine similar difficulties arising on verbal contracts, as for example if the discourse were carried on in a language imperfectly understood by one or both of the speakers. But we are not aware that anything of this kind has been the subject of judicial decision (b). The general result of persons talking at cross purposes is tha. there is no real agreement at all. This class of cases has already been dealt with. We are now concerned with those where there does exist a real agreement between the parties, only wrongly expressed. Such mistakes as we are now about to consider are not wholly disregarded by courts of law; but they are fully and adequately dealt with only by the special jurisdiction of courts of equity. We shall see that this jurisdiction is exercised with much caution and within carefully defined limits. Classification of cases ac cording to the re On the whole the cases of mistake in expressing intention fall into three classes: 1. Those which are sufficiently remedied by the general rules medies ap. of construction applied both at law and in equity. plicable: 1. General rules of construc tion. 2. Special equitable rules of construction. 3. 2. Those which are remedied by rules of construction applied by courts of equity but not by courts of law. 3. Those which require peculiar remedies administered by courts of equity. We proceed to take the classes of cases above mentioned in order. Special (a) Stewart v. Eddowes, L. R. 9 (b) See however Phillips v. Bis tolli, 2 B. & C. 511, which comes near the supposed case. |