Restitution
front page

What's new?

Archive front page

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2007

2006

2008

2009

Dear everyone

I have enjoyed the useful exchanges over the Great Peace case, and am looking forward to reading the case more closely. I'd like to add a few points, mostly by way of agreement with what others have said. But some consequences worry me, and I'd be interested to know whether they worry others too.

I agree the notion of "equitable mistake" - though it had justifiable policy aims - was always something of a muddle from a strictly jurisdictional point of view. There are so many parallels between frustration and mistake, that it seems odd that equity can intervene in the one case but not the other. The consequences of that view, as expressed in para 76, seem to me to be quite disastrous, but that is another matter.

So I am happy to follow Steve Hedley's path a certain distance. "Mistake" and Frustration" perform similar functions, the one relating to events existing at the time of the contract, the other relating to events occurring after that time. A useful example is the contract for construction of a tunnel. Suppose the contractors unexpectedly strike rock where they thought there would be clay. It's much too expensive to shift at the agreed contract price. You could deal with this either as an existing event (the state of the ground) or a future one (what they would encounter along the way). Without suggesting there is any right answer to the example, it has always seemed to me to make little sense if you get a different result, depending solely on whether you appeal to the law of frustration or the law of mistake. But I am not so sure about Steve's comments about the way it all depends on the fact that "the parties' agreement embodied an assumption". This harks back to a very old (and in my view rather finickity) debate, about whether mistake is simply a matter of contract interpretation. The practical side is, of course, that no court would think of holding in favour of mistake or frustration, without a most anxious consideration of the terms of the contract. But what if the court is left genuinely in doubt, about whether there was a "embodied assumption" over a state of affairs X (existing or future), which, almost by definition, neither side has focussed their minds on? Or suppose, though both parties independently thought X when Y was true, they never discussed it so that it wasn't present in the "matrix" of fact common to their negotiation? In either event there is, I suspect, no "embodied assumption" yet a court would - and I think should - intervene once it becomes apparent that the contract will work out much worse than the parties had expected.

The "common assumption" and "mistake" themes are thus complementary approaches, rather than theoretical alternatives. So it seems to me that writers and judges use symbols - the ideas of "mistake" and "impossibility" - which provide a starting point from "outside" the four corners of the contract. If we discover that both parties have made the same mistake or prediction, or simply haven't thought about it at all (even though - objectively speaking - it needed attention) then that is a start. Then we look at the contract. If it is totally silent on the point, and after we have considered the basic objectives of the contract, we still think the point is "fundamental" to the parties' aspirations for their contract, then we can say it's likely that the Court will grant relief. I may be wrong, and the point I am making looks like a precious one. But it seems to me that it can make a difference, so that neither doctrine is confined to a "narrow ambit" - I don't like that at all!

Paul Michalik was kind enough to inject NZ's Contractual Mistakes Act 1977 into the discussion. I am still prepared to admit some responsibility for what the Act contains, and to defend it in its moments of peril. In section 6(1), it follows the philosophy I have described. To me, though, the key thing about the Act is the much more flexible remedies it provides in section 7. They are more varied than those available even under the Solle v Butcher ruling. I think I can say that the hope was that courts would be more open to giving relief, once they could use the remedial provisions to alleviate any hardship that might be suffered by the party insisting on the contract. Unfortunately, the Law Reform Committee that drafted the legislation could not be prevailed upon to specify the principles on which that remedial discretion would be exercised. Had it done so, that might have clarified the scope of the discretion, and helped with subsequent difficulties over the interpretation of section 6 as well.

Could I conclude with a brief additional comment on the vexed problem of "misprediction"? I agree with Steve that it seems unprincipled, in the present context, to raise a distinction between mistake and misprediction. Nor is it useful to ask whether the mistake related to something whose truth or otherwise could have been discovered at the time of the contract. And also, with him, I don't think all this means that the law of restitution and the law of contract are irreconcilable, but I suspect my reasons for thinking this may differ from his.

The problem, it seems to me, lies the use of the "misprediction" doctrine as a bar to recovery in the law of mistaken payments. Let us take as an example the case of A, who receives a bill from B Co , and he is not sure whether it is really due. He rings up B Co, and they tell him, "We believe this bill is correct, but unfortunately our computers have been out for week and there's no way of checking your query at the moment". A, who is a meticulous about paying his bills on the 20th of the month, says to himself, "I'll pay this now and if there's anything wrong, I'm sure they'll give me a credit on next month's bill." And, when it turns out that there's been a mistake, they do. But surely it can't be right to say B Co could have kept A's money if it wanted? It is just not true to say that A has "taken a risk", or "done what he set out to do", when he has acted on a bill which would not have been issued if the true facts had been known. In this case (with Steve) I think "common assumption" analysis works better than Duncan Sheehan's "mistake vs misprediction" analysis. Nor can I see how Duncan's latest suggestion (that there's a difference between completed and uncompleted transactions) gets around this problem, because on its face the payment is complete when A makes it. But (unlike Steve) I think the notion of "mistake" should be widened to cover this type of situation too.

My worry is that if the misprediction doctrine is implausible in the contract setting, it is just as likely not to work in the mistaken payment setting either, as I think my example shows. In both cases the doctrine substitutes a purely temporal criterion, for a much more complex inquiry into policy and principle. The Clarion case is one such example - it didn't, on my reading , turn simply on the question of misprediction, but rather on the fact that the mistake was about the effect of the agreement the parties were making (cf NZ's CMA, s 6(2)(a)). And the recent judicial - and august - support for the misprediction doctrine in the Dextra case was unnecessary for the decision, and doesn't, unfortunately, make the doctrine any the more workable. I have my own views on this which I hope will soon appear in print, but I'd be interested in whether others think it might be an open question.

Sorry this has turned out so long-winded!

Richard Sutton
--
*****************************************
Richard Sutton
Professor
Faculty of Law
University of Otago
PO Box 56
Dunedin
New Zealand
phone: ++(64) (03) 479 8845. fax:(03) 479 8855
hm phone: ++ (64) (03) 4672-874