Innocent Misrepresentation v. Mistake

Question

1. How does Innocent Misrepresentation differs from Mistake?

2. Scriven Brothers & Co. v Hindley (1913) (quoted below) illustrates my bewilderment. Defendant made a false statement of fact, acted upon by Plaintiff, pre-contractually that definitely induced the P to contract. So isn't it obvious D made an innocent misrepresentation to P?

3. Thus why did the first 2 textbooks below discuss it in solely the chapter on mistake, not (again) in misrepresentation? The third textbook discusses it in solely Ch 2 on Offer and Acceptance, and never again, not even Mistake!

Poole, Shaw-Mellors. Contract Law Concentrate (4 ed 2019). p 38.

FACTS: The Ds mistakenly bid for bales of tow believing they were hemp. At the auction the Ds had examined a sample, which happened to be hemp, and thought that all the bales were hemp because they all had the same shipping mark. This was accepted as a reasonable interpretation but so too was the auctioneer’s belief that the bales being sold were tow.

HELD: There was no contract and the Ds did not have to pay for the tow.

However, in Tamplin v James (1880) the purchaser mistakenly believed the lot of property being sold included some garden but had failed to check the plan which indicated that no garden was included. The purchaser was at fault and could not avoid the contract by citing his mistake.

Anson's Law of Contract (2016 30 ed). p 275. Note the 31st ed will be published in Apr 2020.

        Similarly, if A makes to B an offer which is ambiguous in its terms, or is rendered ambiguous by the circumstances surrounding it, and B accepts the offer in a different sense from that in which it is meant, then unless an objective construction requires otherwise, B may effectively maintain that there is no binding contract. In Scriven Bros & Co v Hindley & Co:37

S instructed an auctioneer to sell certain bales of hemp and tow. These bore the same shipping mark and were described in the auction catalogue as so many bales in different lots with no indication of the difference in their contents. H’s manager examined samples of the hemp before the sale intending to bid for the hemp alone. At the auction, the tow was put up for sale, and H’s buyer, believing it to be hemp, made a bid which was a reasonable one if it had been intended for hemp, but an excessive one for tow. This bid was accepted by the auctioneer, who did not realize the buyer’s mistake, but merely thought the bid an extravagant one for tow. S sought to enforce the contract by suing for the price.

It was clear that offer and acceptance did not coincide. S intended to sell tow; H’s buyer, misled by the auction catalogue, intended to buy hemp. The Court held that there was nothing in H’s conduct which would estop it from pleading that the parties were not in agreement as to the subject- matter of the sale— or, to put it in the language of the objective test set out by Blackburn J in Smith v Hughes,38 H had not so conducted itself that a reasonable man would believe that it was assenting to S’s terms. Accordingly, no contract had come into existence, and H was not liable.

O'Sullivan & Hilliard's The Law of Contract (2018 8 ed). p. 16.

2.17 In Scriven v Hindley (1913), the claimant was selling bales of hemp and bales of tow at auction. However, he did not make clear which lot was the hemp and which lot was the tow. The defendant, thinking he was bidding for the lot that contained the hemp, actually bid for the tow. It was held that there was no contract for the sale of the tow, because the defendant’s apparent intent (to bid for the tow) had been caused by the claimant’s carelessness in not making it clear which lot was which. Therefore, because the objective principle did not apply, the court looked at the parties’ actual intention. The defendant’s intention (to buy the hemp) did not coincide with the claimant’s intention (to sell the defendant the tow) so there was no contract.

Answer 1

Mistake

Specifically, this case deals with mutual mistake (there are other types of mistake). The essence of mutual mistake is that the parties are at cross-purposes; each party has made a different mistake concerning a fundamental element of the contract.

In this case, the plaintiff was buying hemp but the defendant was selling tow. The defendant did not mislead the plaintiff¹ but the circumstances were such that the plaintiff's erroneous conclusion from the available information was reasonable.

With misrepresentation, the parties are not at odds about the fundamentals but rather one party has caused the other to believe something that is not true. For example, in Leaf v International Galleries 1950, the plaintiff bought a painting that the defendant said was a Constable. It wasn't, so the statement was misleading; however, there was no mistake because both parties were in agreement that it was this painting that was the subject of the sale.

Consider this example. I mention that I'm thinking of selling my car (my Porche). You've always appreciated my Ferarri and express interest in buying. We agree on a price: you to buy the Ferarri, me to sell the Porche. That is pretty much the textbook definition of mutual mistake. No one misled anyone, we were both not understanding what was being offered and what was being accepted - mistake is fundamentally tied to the offer and acceptance in that it is a mistake when they don't line up.

In contrast, if we realize the mistake and you are still interested in the Porche and ask "What year is it?" - if I say "2017" when it is actually 2016, then that is a misrepresentation. It's not a mistake because we are not at cross-purposes; we are both talking about the Porche.

¹Silence is not a [mis]representation unless there is a legal obligation to divulge information and absent a deliberate attempt to mislead by the silence. For example, if I know the house I'm selling has termites, I don't have to tell you that but I also can't say "I've had a recent pest inspection" and then remain silent about what it found because a reasonable person would conclude from my statement that the house has no pests.

Answer 2

How does Innocent Misrepresentation differs from Mistake?

Ordinarily, an "innocent misrepresentation" is basically just one form of a mistake.

The term "misrepresentation" is normally used as a legal theory only for misrepresentations that are either negligent misrepresentations or intentionally misrepresentations, both of which give rise to tort remedies and/or a right to cancel the contract in some circumstances.

A mistake, when it is legally relevant, in contrast, usually gives rise only to a right to cancel a contract, and possibly to obtain restitution to the extent that the contract has been partially performed.