Published On: Fri, Feb 19th, 2016

The effect of a unilateral mistake in Law

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Asokoro Medical Laboratories acquires some new equipment in Lagos and wishes to transport them to its headquarters in Abuja. Mr Johnson, a member of staff of the company, takes the equipment to the Cargo Division of City Link Transport Services in Jibowu, Lagos.

The weight of the cargo is determined to be 500kg. An invoice is issued by the staff of City Link and Mr Johnson is directed to the accountant to make the required payment. The freight rate written on the invoice is N8 per kilo and so, the sum of N4,000 is paid for the conveyance of the equipment.

Later in the day, Asokoro Medical Laboratories receives a call from the cargo manager of City Link Transport Services in Lagos. They are informed that an error must have been made in the transaction, earlier that day. The official freight rate for goods conveyed from Lagos to Abuja is N80 per kilo and not N8, as written in the invoice. This would bring the amount due to N40,000 for the conveyance of 500kg and not N4,000, which was paid by Mr Johnson. The cargo manager refuses to convey the equipment to Abuja until the required sum is duly paid.

From the foregoing, what is the legal position of the parties concerning the mistake made in the transaction?

As already established, there are three classes of mistake in law: a) Common Mistake b) Mutual Mistake c) Unilateral Mistake. The subject of the above scenario is unilateral mistake. The factor that distinguishes unilateral mistake from the other two types is that, in this case, only one party is entering the contract under a mistake and the other party either knows or is presumed to know that the first party is indeed labouring under a mistake.

The legal issues to be considered in this situation are:

  1. What constitutes a unilateral mistake in law?
  2. The effect of a unilateral mistake in a transaction.

The rule governing unilateral mistake, as applied in the case of Hartlog v. Colin Shields, is that where it is established that one party is mistaken, or is presumed to be mistaken, the contract is rendered void. With regard to the person making the mistake, the test of mistake is subjective. What the law takes into consideration is his actual belief and intention, not what a reasonable man in his position would have thought or believed.

However, concerning the other party, where he himself did not induce the mistake of the first party, he is nevertheless presumed to be aware of the mistake, if it would have been obvious to a reasonable man in the circumstances.

On the matter of the transaction for the conveyance of equipment belonging to Asokoro Medical Laboratories by City Link Transport Services, the goods to be transported were weighed, an invoice was issued and payment was made. However, there is a dispute regarding the amount paid, which apparently is the result of an error on the part of City Link Transport Services.

In determining the existence of a unilateral mistake, a subjective test will have to be taken. In this case, the actual intention of the party making the mistake (City Link Transport Services) is what will be considered. The Cargo Manager of City Link has expressed that the figures indicated in the invoice issued to Mr Johnson were written in error. Indeed, the official rates are ten times those presented and so, the amount paid was only 10 per cent of that which was due.

In the case of Abdul Yususf v. Nigerian Tobacco Company, the defendants engaged several lorry owners, including the plaintiff, to haul tobacco from various parts of Western Nigeria to their cigarette manufacturing factory at Ibadan. The freight rate typed in the agreements was half penny per lb per mile. The plaintiff commenced the carriage of tobacco and continued for sixteen days, until they were stopped by the defendants.

The defendants claimed that the normal freight rate for the carriage of their tobacco was half penny per 100 lb per mile and not half penny per 1 lb per mile, and that the latter figure appeared on the agreement as a result of a typing error. They then invited the plaintiff and the other transporters to bring in their agreements for necessary rectification to read half penny per 100 lb. Whilst others agreed, the plaintiff refused and consequently, the defendants cancelled their contract with him. The plaintiff then sued the defendants for breach of contract, claiming damages, based on the freight he would have received if he had been paid at the rate of half penny per lb.

In an appeal by the defendants at the Western Court of Appeal, it was held that this was a clear case of unilateral mistake. From the circumstances, the plaintiff must have known that the defendants made a mistake in their offer. Any “reasonable fair-minded person” would have been put on his enquiry as to the correctness or otherwise of the freight rate.

In view of this, the application of the subjective rule (which goes to the intention of the mistaken party) will result in the determination of a unilateral mistake. The contract between Asokoro Medical Laboratories and City Link Transport Services for the conveyance of equipment from Lagos to Abuja will therefore be rendered void.

Principles and cases are from Sagay: Nigerian Law of Contract

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The effect of a unilateral mistake in Law