Citation(2005) 17 SAcLJ 148
Published date01 December 2005
Date01 December 2005

There is a constant need to achieve a balance between certainty and fairness in the law of contract. In this respect, vitiating factors tend to focus on the latter (with the former constituting, at most, just one conception of fairness, amongst others). However, because of the consequent danger that contracts might be unravelled unnecessarily by the application of such factors, there is a need for doctrinal as well as conceptual clarity. This article focuses, first, on key (and recent) doctrinal developments — particularly with regard (but not limited) to the law of mistake and the law relating to undue influence. Doctrinal developments cannot, however, be wholly understood without an appreciation of the relevant conceptual underpinnings and linkages. To this end, a few key conceptual difficulties will also be examined with a view to elucidating a more effective practical approach towards the vitiating factors concerned.

I. Introduction

1 I last delivered a seminar on vitiating factors in contract law almost exactly seven years ago to the day. It was somewhat of a marathon session lasting several hours, and both speaker and audience were not unlike exhausted runners staggering towards the finish line by the time the session was about to conclude. The result of that seminar reflected this: a 96-page article with 488 footnotes.1 In the more than half decade that has passed since that seminar, the law relating to vitiating factors has continued to develop apace. There has also been a burgeoning in the

academic literature as well.2 Indeed, the content of development in certain specific areas has been — in a word — intense. This is correspondingly reflected in the present article, which is of roughly the same length as the earlier article just mentioned,3 and which deals with relatively substantive changes in the law itself. In this regard, two areas stand out: the first relates to the law of mistake and the second, to the law relating to undue influence.4 Indeed, in so far as the former area is concerned, there have rarely been so many developments in the law of mistake in so relatively short a period of time, with so much actual, as well as potential, impact. So important are these developments that they will take up a substantial portion of this article (although I will, of course, also be dealing with developments in other areas as well). As we shall see, however, the law relating to mistake in its various aspects has by no means been clarified, although much food for legal thought has been generated as a result. The law relating to undue influence has also developed in different — and significant — directions. The main decision in this regard is one that I shall also be reviewing in some detail: that of the House of Lords in Royal Bank of Scotland plc v Etridge (No 2).5 As importantly, in my view, are the implications of the decision in so far as linkages with other related doctrines, such as economic duress and unconscionability, are concerned.

2 In many ways, the present article is a kind of update of developments that have taken place since I last dealt with the topic.6 However, it is more than simply a doctrinal update. If nothing else, legal doctrine does not exist in a vacuum. Whilst it is indispensable to the very enterprise of the law itself, inasmuch as the law (or anything else for that matter) cannot function practically without a structure, it is insufficient (in and of itself) to ensure that justice is achieved.7 In other words, the structure (or architecture) of the law, as embodied within legal doctrine, must be accompanied by a spirit of justice and fairness.8 The entire process is a holistic one comprising both these factors that interact in an integrated fashion. A variation of this is the oft-cited tension between

procedural fairness on the one hand and substantive fairness on the other. The former looks more (on occasion, solely) to the procedures laid down by the rules whilst the latter looks to the spirit of justice that is manifested in a fair and just result or outcome.9 Once again, this tension is more apparent than real. One cannot, in other words, divorce procedural from substantive fairness: as Prof Atiyah has perceptively — and persuasively — argued, both impact on, as well as interact with, each other.10 There is of course an at least residuary wariness in responding to the issue of substantive fairness directly. This is due to the general sense that the issue of substantive justice is one that is susceptible to the argument from subjectivity or relativity and that it would therefore be best to confine arguments to the procedural or doctrinal spheres. However, because both the procedural and substantive spheres are, as I have just argued, both theoretically as well as practically inseparable, it is submitted that the approach just mentioned is unpersuasive and impractical. This approach is nevertheless very firmly entrenched in the psyche of English law in general and English contract law in particular and results in a strict separation of the legal from the extra-legal, which separation is more popularly known as legal positivism.11 And it does not of course help that Singapore law finds its foundation in English law.12 However, I have argued elsewhere that line-drawing by courts is inevitable, if nothing else because objectivity is an inherent part of the entire enterprise of the law.13 I will return to this more general issue later.14 It is important, at this juncture, to emphasise that it is imperative that the issue of substantive

fairness not be left shipwrecked on the shoals of subjectivity merely because the primary focus of vitiating factors in contract law is invariably on the issue of substantive fairness.

II. Mistake
A. Introduction

3 It used to be thought that cases on mistake would be rare.15 In recent years, however, there have been a few very significant decisions — one of which constituted the first major decision in mistake from the House of Lords for over seven decades. This is not, perhaps, surprising in view of the increasing importance of vitiating factors generally during economically turbulent times when parties who find themselves on the wrong side of bargains are not averse to availing themselves of such factors (including those relating to mistake) in order to free themselves of legal liability. Yet, the courts must maintain an equitable balance between maintaining the sanctity of contract on the one hand and freeing parties from contracts where not to do so would result in injustice. As we have also seen, the fundamental problem relates to how and where to draw the line. And the law relating to mistake is no exception. In this Part, we examine, in turn, three main areas of the law of mistake in contract law: the first relates to common mistake, the second relates to mistaken identity, and the third pertains to what is probably the first Internet mistake case (which emerges, significantly, from Singapore). In addition, I will touch very briefly on a recent (and significant) Singapore Court of Appeal decision which belongs, however, more appropriately under the law of restitution. Let us consider each of these areas seriatim.

B. Common mistake and the abolition of common mistake in equity

4 The categories of common mistake at common law and common mistake in equity have been long and firmly established in all the major contract textbooks.16 However, the recent English Court of Appeal decision of

Great Peace Shipping Ltd v Tsavliris Salvage (International) Ltd 17 held that its previous decision in Solle v Butcher18 was inconsistent with the House of Lords decision in Bell v Lever Brothers, Limited,19 and ought therefore not be followed. In other words, there is — for the moment at least —no longer any doctrine of common mistake in equity— at least under English and, possibly, Singapore laws. This is, as we shall see, a radical (and even startling) development which may not augur well for the development of the law in this area.

5 The facts in the Great Peace Shipping case itself are relatively straightforward. A vessel, the “Cape Providence”, suffered serious structural damage. The defendants, on learning of this, promptly offered their salvage services, which offer was accepted. The tug allotted the task of helping in the salvage operation was, however, still five to six days away. The defendants then approached a firm of London brokers whose representatives (Messrs Little and (then) Holder) negotiated (in turn) with the plaintiffs’ representatives with a view to chartering the plaintiffs’ vessel, the “Great Peace”, which was intended to escort the “Cape Providence” (and with a view to saving life, if necessary) until the tug arrived. The London brokers’ representatives had in fact earlier been informed by an organisation providing weather forecasting services to the shipping industry that the “Great Peace” was nearest to the “Cape Providence” at that particular point in time (apparently some 35 miles distant). A charter was duly entered into between the defendants and the plaintiffs (for a minimum of five days). However, unknown to the parties’ representatives, the “Great Peace” was in fact 410 miles away from the “Cape Providence”.20 As a result, the defendants, on being thus informed shortly after the contract had been entered into, decided only to cancel their charter for the “Great Peace” if no nearer available vessel could be located. Fortuitously, another vessel, the “Nordfarer” happened to pass by the “Cape Providence” and (even more fortuitously) the charterers of the former vessel also happened to be the charterers of the latter vessel. Not surprisingly, the defendants contracted with the owners of the “Nordfarer” directly and instructed Mr Holder to cancel the charter for the “Great Peace”, which the latter duly did. The plaintiffs were naturally upset and when (notwithstanding the plaintiffs’ representatives’...

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