• In the case of Solle v Butcher [1950] 1 K.B. 671, the Court of Appeal held mistake can be applied more broadly using equity rather than common law.
  • This contract case involved mistakes, rescission and leases.
  • This case questioned whether equity or common law principles applied to the circumstances.

Facts of the Case

  • C rented a flat to D. They were both unaware that under the Rent Restrictions Act, the maximum rent was £140 annually.
  • D paid £250 a year. D claimed contract rescission for common mistake.
  • In the lower courts, it was held there was no mistake.

Issues

  • Was there a mistake of fact or mistake of law?
  • Which mistakes render a contract voidable?

Held by Court of Appeal

  • Appeal allowed – the lease should be set aside on the grounds of mutual mistake and equitable principles.

Denning LJ

Mistakes

  • D relied on C’s statements to determine the rental prices annually. Thus the rules of equity should apply a remedy under these circumstances.
  • “It is now clear that a contract will be set aside if the mistake of the one party has been induced by a material misrepresentation of the other, even though it was not fraudulent or fundamental; or if one party, knowing that the other is mistaken about the terms of an offer, or the identity of the person by whom it is made, lets him remain under his delusion and concludes a contract on the mistaken terms instead of pointing out the mistake.”

Equity

  • “A contract is also liable in equity to be set aside if the parties were under a common misapprehension either as to facts or as to their relative and respective rights, provided that the misapprehension was fundamental and that the party seeking to set it aside was not himself at fault.”
  • The judge relied on Cooper v Phibbs [1867] UKHL 1 as authority holding that terms should be enforced to ensure a fair outcome under equity.
  • “If the lease were set aside without any terms being imposed, it would mean that the plaintiff, the tenant, would have to go out and would have to pay a reasonable sum for his use and occupation . . . I think that this court should follow these examples and should impose terms which will enable the tenant to choose either to stay on at the proper rent or to go out.”

Jenkins LJ

Fraud

  • Appeal should be dismissed based on what both parties have expressly agreed.
  • “Fraud being neither charged nor proved, the plaintiff must be taken to have been expressing the opinion which he genuinely held at that time. The expression of an opinion bona fide held on a question of law is not misrepresentation.”
  • C cannot use the advice given to D to their own benefit even if they were mistaken about it too.
  • “The tenant could thus be deprived of his bargain and turned out even though he had never dreamed of claiming the benefit of the Acts and had no other intention than to pay the full contractual rent, whether legally recoverable or not. This seems to me a curious result indeed.”

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