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Date: 28.08.2017

A Mistake in Judgment (1913)

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On 15 May , the defendant sold the cargo to Challender on credit. The vessel had sailed on 23 February but the cargo became so heated and fermented that it was unfit to be carried further and sold. On May 23 Challender gave the plaintiff notice that he repudiated the contract on the ground that at the time of the sale to him the cargo did not exist.

The plaintiffs brought an action against the defendant who was a del credere agent, ie, guaranteed the performance of the contract to recover the purchase price.

Martin B ruled that the contract imported that, at the time of sale, the corn was in existence as such and capable of delivery, and that, as it had been sold, the plaintiffs could not recover.

This judgment was affirmed by the House of Lords. Griffith v Brymer 19 TLR At 11am on 24 June the plaintiff had entered into an oral agreement for the hire of a room to view the coronation procession on 26 June. A decision to operate on the King, which rendered the procession impossible, was taken at 10am on 24 June. Wright J held the contract void.

The plaintiffs incurred considerable expenditure in sending a salvage expedition to look for the tanker. There was in fact no oil tanker, nor any place known as Jourmand Reef. The plaintiffs brought an action for 1 breach of contract, 2 deceit, and 3 negligence.

The trial judge gave judgment for the plaintiffs in the action for deceit. He held that Couturier v Hastie obliged him to hold that the contract of sale was void and the claim for breach of contract failed.

The High Court of Australia stated that it was not decided in Couturier v Hastie that the contract in that case was void. The question whether it was void or not did not arise. If it had arisen, as in an action by the purchaser for damages, it would have turned on the ulterior question whether the contract was subject to an implied condition precedent.

In the present case, there was a contract, and the Commission contracted that a tanker existed in the position specified. Since there was no such tanker, there had been a breach of contract, and the plaintiffs were entitled to damages for that breach. Cooper v Phibbs LR 2 HL An uncle told his nephew, not intending to misrepresent anything, but being in fact in error, that he the uncle was entitled to a fishery.

However, the fishery actually belonged to the nephew himself. The House of Lords held that the mistake was only such as to make the contract voidable. Lord Westbury said "If parties contract under a mutual mistake and misapprehension as to their relative and respective rights, the result is that that agreement is liable to be set aside as having proceeded upon a common mistake" on such terms as the court thought fit to impose; and it was so set aside.

Bell v Lever Bros Ltd [] All ER 1 The plaintiff company contracted with the defendants who were to act as chairman and vice-chairman of a subsidiary company.

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It was later agreed between the parties that the defendants should resign their positions in consideration of payments by way of compensation. It later transpired that the defendants, without the knowledge of the plaintiffs, had engaged in private transactions resulting in a secret profit to themselves. It was held by the House of Lords that the erroneous belief on the part of both parties to the agreements, that the service contracts were determinable except by agreement did not involve the actual subject-matter of the agreements, but merely related to the quality of the subject-matter and so was not of such a fundamental character as to constitute an underlying assumption without which the parties would not have entered into the agreements, and, therefore, the plaintiffs were not entitled to succeed in their action.

See extract from the speech of Lord Atkin. All previous decisions on this subject must now be read in the light of Bell v Lever Bros. The correct interpretation of that case, to my mind, is that, once a contract has been made, that is to say, once the parties, whatever their inmost states of mind, have to all outward appearances agreed with sufficient certainty in the same terms on the same subject-matter, then the contract is good unless and until it is set aside for failure of some condition on which the existence of the contract depends, or for fraud, or on some equitable ground.

Neither party can rely on his own mistake to say it was a nullity from the beginning, no matter that it was a mistake which to his mind was fundamental, and no matter that the other party knew he was under a mistake". Leaf v International Galleries [] 1 All ER In , the plaintiff bought from the sellers an oil painting of Salisbury Cathedral which was represented to him as a painting by Constable, a representation which was held to be one of the terms of the contract.

In he found that the picture was not a Constable. The buyer brought an action for the rescission of the contract on the ground that there had been an innocent misrepresentation.

The Court of Appeal held that the buyer had lost the right to rescind when he accepted delivery of the picture, or at least, when a reasonable time had elapsed after his acceptance, and five years was more than a reasonable time.

Denning LJ stated obiter: But such a mistake does not avoid the contract: It was a specific picture, "Salisbury Cathedral. After the goods had been delivered, the buyers found that, instead of being pure kapok, they contained an admixture of cotton, which was unsuitable for their machinery.

Both parties thought that Calcutta Kapok "Sree" brand was pure kapok. Pilcher J held that when goods are sold under a known trade description, without misrepresentation or breach of warranty, the fact that both parties are unaware that goods of that known trade description lack any particular quality is irrelevant.

Therefore the contracts were not nullities and the buyers were bound by them. After B failed to keep up the payments it was discovered that the transaction was a fraud perpetrated by B. It was held by Steyn J that on its true construction the guarantee was subject to an express or implied condition precedent that there was a lease in respect of four existing machines.

Steyn J stated obiter that a contract will be void ab initio for common mistake if a mistake by both parties to the contract renders the subject matter of the contract essentially and radically different from that which both parties believed to exist at the time the contract was executed.

However, the party seeking to rely on the mistake must have had reasonable grounds for entertaining the belief on which the mistake was based. Cooper v Phibbs For facts, see above. The House of Lords set the agreement aside on the terms that the defendant should have a lien on the fishery for such money as the defendant had expended on its improvements Solle v Butcher [] 2 All ER In a dwelling house had been converted into five flats.

In Flat No. In the defendant took a long lease of the building, intending to repair bomb damage and do substantial alterations. The plaintiff and defendant discussed the rents to be charged after the work had been completed. The defendant contended that the flat had become a new and separate dwelling by reason of change of identity, and therefore not subject to the Rent Restriction Acts. The Court of Appeal held that i the structural alterations and improvements were not such as to destroy the identity of the flat as let in , and ii on the evidence, the parties had addressed their minds to the material issue of identity of the new flat, and their mistake or common misapprehension as to whether the flat had been so altered as to destroy its identity was a mistake of fact, and the landlord was entitled to have the lease set asid in equity on such terms as the court thought fit.

The defendant refused to perform and alleged that the agreement had been entered into by her under mistake of fact. The defendant believed that the property was occupied by a statutory tenant who had actually died. The plaintiff buyer brought an action for specific performance of the agreement. The defendant counterclaimed for rescission of the sale agreement. It was held that there was equitable jurisdiction to set aside the sale agreement for common mistake of fact and the sale agreement would be set aside because the mistake was fundamental, even on the footing that it had been open to the son to maintain a claim to protection as a statutory tenant, and any fault of the defendant vendor in not knowing who her tenant was was not sufficient to disentitle her to relief, the defendant offering to submit to a condition that she would enter into a fresh contract to sell the property to the plaintiff at a proper vacant possession price.

Magee v Penine Insurance [] 2 All ER The plaintiff signed a proposal form, filled in by his son, for the insurance of a motor car. There were a number of mis-statements in the proposal, in particular it was mis-stated that the plaintiff held a driving licence. The proposal was accepted by the defendant insurance company.

The car was accidentally damaged and the plaintiff made a claim in respect of it. The insurance company then discovered the mis-statements in the proposal form and refused to pay. The contract was therefore voidable in equity, and it would be set aside because in the circumstances it was not equitable to hold the insurance company to it; b per Fenton Atkinson LJ the agreement to compromise was made on the basis of an essential contractual assumption, namely, that there was in existence a valid and enforceable policy of insurance.

Since that assumption was false the insurance company was entitled to avoid the agreement on the ground of mutual mistake in a fundamental and vital matter. The value of a piece was approximately one-third that of a pound. In verbal and written negotiations which took place prior to the sale, reference had always been made to the price per piece and never to the price per pound, and expert evidence was given that hare skins were generally sold at prices per piece.

It was held that the plaintiff could not reasonably have supposed that the offer expressed the real intention of the persons making it, and must have known it to have been made by mistake. The plaintiff did not, by his acceptance of the offer, make a binding contract with the defendants. Smith v Hughes [] All ER The plaintiff farmer, having new oats, asked the manager of the defendant racehorse trainer, if he wanted to buy oats.

On being answered by the manager that he was always ready to buy good oats, the farmer gave him a sample and told him the price.

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The manager took away the sample and the next day bought the bulk, but afterwards refused to accept the oats because they were new, whereas he said, he had thought to buy old oats. In the county court, there was a conflict of testimony over the type of oats mentioned at the bargaining.

It was held that the passive acquiescence of the seller in the self-deception of the buyer did not, in the absence of fraud or deceit on the part of the seller, entitle the buyer to avoid the contract, and there must be a new trial. The plaintiff accepted but the defendant refused to complete.

Romilly MR refused a decree of specific performance. These goods were never paid for. Wallis had fraudulently obtained these goods and sold them to Edridge Merret, who bought them bona fide. It was held by the Court of Appeal held that if a person, induced by false pretences, contracted with a rogue to sell goods to him and the goods were delivered the rogue could until the contract was disaffirmed give a good title to a bona fide purchaser for value.

The plaintiffs intended to contract with the writer of the letters. In the opinion of AL Smith LJ, there was a contract by the plaintiffs with the person who wrote the letters, by which the property passed to him. There was only one entity, trading it might be under an alias, and there was a contract by which the property passed to him. Philips v Brooks [] All ER North visited the plaintiff jeweller, and chose some pearls and a ring.

While writing a cheque in payment, he represented to the plaintiff that he was Sir George Bullough, with an address in St James Sq, London. The plaintiff had heard of Sir George as a man of means, and on referring to the directory found that he lived at the address given by North. He therefore allowed North to take away the ring. In fact, the cheque was worthless and North was convicted of obtaining the ring from the plaintiff by false pretences.

North had pawned the ring with the defendant pawnbrokers, who took it bona fide and without notice in the course of business, giving value for it. The plaintiff brought an action for the return of the ring. Ingram and others v Little [] 3 All ER The joint owners of a car, two sisters and a third person, advertised it for sale.

A swindler called on them and agreed to buy the car. When they refused to accept a cheque, he tried to convince them that he was a reputable person and said that he was a Mr Hutchinson of Stanstead House, Caterham. One sister went to the local post office and returned to say that she had checked the name and address in the telephone directory.

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They decided to accept the cheque. The cheque was dishonoured and the man, who was not Mr Hutchinson, disappeared having sold the car to Little, who had bought it in good faith. The owners brought an action to recover the car or its value from Little. It was held by the Court of Appeal Devlin LJ dissenting that the offer to sell on payment by cheque was made only to the person whom the swindler had represented himself to be, and as the swindler knew this, the offer was not one which was capable of being accepted by him.

Therefore, there had been no contract for the sale of the car by the plaintiffs and they were entitled to recover the car or damages from the defendant. A man, who turned out to be a rogue, called on Lewis, tested the car and said that he liked it.