Bell v Lever Brothers Ltd
A common mistake as to quality makes a contract void only if it makes the subject matter essentially different from what was believed.
Facts
Lever Brothers appointed Mr Bell and Mr Snelling as chairman and vice chairman of the Niger Company, a subsidiary, on five year service contracts. When the Niger Company was merged with another company, their posts were no longer needed, and Lever Brothers agreed to pay them £30,000 and £20,000 respectively as compensation for ending their contracts early. Lever Brothers later discovered that the two men had committed breaches of duty during their employment by secretly trading in cocoa on their own account, which would have entitled Lever Brothers to dismiss them without compensation. Lever Brothers sought to recover the payments, arguing that the compensation agreements were void for mistake.
Legal principle
The House of Lords held, by a majority of three to two, that the agreements were valid. Lord Atkin said that a mistake as to quality avoids a contract only if it is the mistake of both parties and is as to the existence of some quality which makes the thing without the quality essentially different from the thing as it was believed to be. Lever Brothers got what it bargained for, the termination of the service contracts, even if it could have achieved that more cheaply. The mistake was not sufficiently fundamental, and the men were under no duty to disclose their own breaches.
Related cases on mistake
- Associated Japanese Bank (International) Ltd v Crédit du Nord SA [1989] 1 WLR 255
- Couturier v Hastie (1856) 5 HLC 673
- Cundy v Lindsay (1878) 3 App Cas 459
- Great Peace Shipping Ltd v Tsavliris Salvage (International) Ltd [2002] EWCA Civ 1407, [2003] QB 679
- Hartog v Colin & Shields [1939] 3 All ER 566
- Ingram v Little [1961] 1 QB 31
- Lewis v Averay [1972] 1 QB 198
- Phillips v Brooks Ltd [1919] 2 KB 243
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