CONTROVERSY IN COMMON MISTAKE EXACERBATED IN GREAT PEACE
In the case of Great Peace Shipping v Tsalviris Ltd. T had entered into a contract with Great
Peace to salvage it from distress at sea. At the time of the contract, both parties thought that
Great Peace was actually much closer to the salvage site than the distance it actually was. Thus,
when T discovered this, they decided to hire another ship and they sought to cancel the contract
with Great Peace on the basis of common mistake, and pay nothing to them, in respect of hire
charges. The Court Of Appeal held that the mistake was not sufficiently fundamental to render
the contract void at common law. The court took the view that the contract was still possible to
be performed, since Great Peace would have still been able to carry out the contract, although
later than T expected.
The court went at length to describe the controversy surrounding common mistake over the
years, and paid particular attention to the contributions of Bell and Solle to this area of
jurisprudence. Lord Atkin’s formulation of declaring a contract void at law in the case of Bell,
was seen to be equally confusing as Lord Denning’s formulation of when to declare a contract as
voidable in equity, in the case of Solle. Both tests were said to have left out the precise
parameters of what is meant by ‘fundamental.’ The court believed that Solle did not supplement
the common law in Bell, but in fact contradicted Bell. Ultimately, the court came to the
conclusion in Great Peace, that Solle was wrongly decided and had in fact caused major
complexities in the law of common mistake. 88
The court accordingly made a bold move by stating the following requirements for a common
mistake to be fundamental.
“(a) There must be a common assumption as to the existence of a state of affairs, (b) there must
be no warranty by either party that that state of affairs exist, (c) the non-existence of the state of
affairs must not be attributable to the fault of either party, (d) the non-existence of the state of
affairs must render performance of the contract impossible, (e) the state of affairs may be the
88
[2002] EWCA Civ 1407; [2002] 4 All ER 689, para 157-160
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