The law relating to mistake as to identity is in a convoluted mess - Justin Santiago
Mistake as to identity occurs when parties to a contract are mistaken as to the identity of the person they are contracting with. What commonly happens is that one party misrepresents his or her identity (the rogue) in order to persuade the other party to contract with him to take away goods on credit. The rogue will then sell the goods to a third party. In such cases the rogue would have disappeared and the innocent party will want to seek to recover the goods from the third party and the only way to do this is to find a way to declare that the contract was void and no title has passed under the doctrine of mistake as to identity.
The law on mistake as to identity rests on established priciples governing the formation of contracts. A mistake as to identity eats at the very heart of contract law which states that there must be consensus at idem – a meeting of the minds which could lead to an agreement and hence a contract. When there is a mistake to identity a contract does not come into existence because one party never intended to deal with the other party in the first place. This is also consistent with the nemo dat quad quod non habet rule which states that the rogue will not be able to pass on the title to a third party no matter how innocent this party is.
However case law shows that cases involving mistake as to identity have become unnecessarily complex. Case law over the years has been decided differently depending on who the law felt it should protect and in the process coming up with various conditions to justify their decision in such matters. In Ingram v Little the courts felt it was the sellers who needed protection because they were seen as helpless parties at the mercy of a rogue and the justification for voiding the contract was the fact that they had made checks on the identity of the buyer. In Lewis v Averay it was decided that the seller and the third party were on equal footing it was not necessary to protect the seller and the contract was deemed to be valid.
The law that went on to distinguish between contracts made inter prasentes or inter absentes which made the matter of mistake as to identity even more confusing. Where the parties deal with each other in a face to face transaction (inter prasentes), there is a strong presumption that each party intends to deal with the party in front of him that can only be rebutted in exceptional cases (as in Ingram v Little). With regard to contracts made inter absentes the courts appear to be more willing to infer that a party has made a mistake as to the identity. This was the decision in the House of Lords case of Cundy v Lindsay where it was held that where the parties are not physically in each others presence, eg, they are dealing by correspondence, and one party is mistaken as to the identity of the other then the contract will be void for mistake. This supposedly in line with the proposition that there is a need for greater certainty in relation to written contracts. However within this so called certainty lies several exceptions which was highlighted in the case of King's Norton Metal Co Ltd v Edridge Merrett Co Ltd where it was held that if the innocent party was not particularly interested in the identity of the third party then the contract will not be void. The reasoning was that the innocent party was more interested in the attributes of the other party whereas in the case of Cundy v Lindsay the innocent parties wanted to deal specifically with Blenkiron & Co and not the rogue Blenkarn.
The decision in Cundy v Lindsay was affirmed in Shogun Finance Limited v Hudson (Shogun) where it was deemed that cases of mistaken identity preclude any offer or acceptance taking place.
There is however uncertainty as to why a written contract should be any different from a face to face contract and why should the courts be more willing to accept mistake as to identity in a written contract and why should the mode of communication matter. Shogun did not go to the bottom of these issues although one of the dissenting judges, Lord Nicholls did state that ‘there is no magic attaching to a misrepresentation made in writing rather than by word of mouth.’ In other words there should be no distinction between contracts made inter prasentes and inter absentes. Lord Millet, also one of the dissenting judges, had submitted that the distinction between mistake as to identity and mistake as to attributes should be abandoned.
It would appear that it would be more certain for an aggrieved party to make a claim under fraudulent misrepresentation than unilateral mistake as to identity. Fraudulent misrepresentation may be able to provide all the relief necessary. Fraudulent misrepresentation renders a contract voidable and not void (as in mistake) and the contract remains valid until it is set aside. Section 23 of the Sale of Goods Act 1979 goes on to say that that the right to rescind is lost when an innocent party purchases the goods. Therefor steps that the innocent party can take to render a voidable contract void is to inform the police before the goods pass to a third party and take other reasonable steps to inform potential buyers : Car and Universal Finance Co. v Caldwell. It is easier to prove fraud than mistake and provided that steps where taken to inform the relevant parties, may be less difficult to pursue.
- Justin Santiago
- Justin Santiago, BAppSc (Hons), MBA, LLB (Hons) comes from a journalism, market research, intellectual property and strategic communications consulting background. Now based in Melbourne he spends his time advising businesses on how to communicate to their customers as well as writing on various subjects of interest in this blog.
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