Mistake Under Contract Law in Ghana: Types, Legal Effects, and Key Principles

1. Introduction

Mistake is a vitiating factor in contract law. It arises where one or more parties enter into a contract based on a false assumption of fact that existed at the time the contract was formed. The law recognises that genuine agreement cannot exist where parties are fundamentally mistaken about essential facts underlying the contract.

In Ghana, the doctrine of mistake is governed by the common law, which forms part of the laws of Ghana under Article 11 of the 1992 Constitution. The principles developed by English courts continue to apply subject to statutory modifications and Ghanaian judicial interpretation.

Mistake may render a contract void at common law or voidable in equity depending on the nature and seriousness of the error.

2. Meaning and Nature of Mistake

A mistake is a false assumption of fact made by a party or parties before the formation of a contract. It involves an incorrect belief concerning a state of affairs which materially influenced the decision to contract.

An assumption refers to something accepted as true without verification. Where the assumption is false and is fundamental to the contract, the law may intervene.

For mistake to operate:

1. The mistake must exist at the time of contract formation
2. The mistake must concern an existing fact
3. The mistake must be sufficiently fundamental

If the mistake arises after the contract has been concluded, it cannot vitiate the agreement.

Illustration 1

A buyer agrees to purchase a vehicle believing it is roadworthy. Unknown to both parties, the vehicle had already been written off before the agreement was signed. Since the mistake existed at the time of contract formation, the contract may be void.

However, if the vehicle becomes defective after purchase, mistake does not apply.

3. Operative Mistake and Timing Requirement

The law insists that mistake must be operative at the time the contract is concluded. This principle ensures contractual stability and prevents parties from escaping obligations based on later discoveries.

Case Authority

Amalgamated Investment and Property Co Ltd v John Walker and Sons Ltd (1977)

Facts Explained

John Walker and Sons advertised a warehouse for sale. The property had previously been used as a whisky warehouse. Amalgamated Investment purchased the warehouse for £1,710,000 intending to redevelop it. Before purchase, the buyer asked whether the building was listed as a historic property. The seller replied that it was not listed.

Unknown to the buyer, the building was officially listed as a protected historic building shortly before completion. This meant redevelopment was restricted. The buyer sought to rescind the contract on grounds of mistake, arguing that both parties assumed the building was not listed.

Court Decision

The Court of Appeal refused to set aside the contract. It held that:

• The buyer had taken the commercial risk of listing
• The seller’s statement was true when made
• There was no common mistake at the moment of contracting

The listing occurred after negotiations but before completion. The risk had already passed to the buyer.

Legal Principle

For mistake to operate, it must exist at the moment the contract is formed. Commercial risk allocation is not equivalent to legal mistake.

Illustration 2

If a buyer purchases land believing zoning approval has not been granted, and approval is granted before completion but after signing, mistake does not arise. The buyer bears commercial risk.

4. Fundamental Nature of the Mistake

Not every mistake affects contractual validity. The error must be so serious that it destroys the foundation of the agreement.

The mistake must:

• Affect the root of the contract
• Make performance fundamentally different
• Destroy consensus ad idem

5. Mutual Mistake

5.1 Meaning of Mutual Mistake

A mutual mistake arises where both parties misunderstand the terms of the contract but in different ways. Each party attaches a different meaning to the same expression and neither interpretation is objectively dominant.

This situation produces no real agreement because the parties are operating at cross purposes.

5.2 Legal Requirements

For mutual mistake to exist:

1. The contract terms must be ambiguous
2. Each party must interpret the terms differently
3. Both interpretations must be objectively reasonable
4. There must be no clear meaning identifiable by a reasonable person

Case Authority

Raffles v Wichelhaus (1864)

Facts Explained

Raffles agreed to sell Surat cotton to Wichelhaus. The contract stated that delivery would be by a ship called Peerless sailing from Bombay. There were two ships named Peerless. One sailed in October and the other in December.

Raffles intended the December ship. Wichelhaus believed the October ship was intended. When delivery arrived late according to Wichelhaus’s understanding, he refused payment.

Court Decision

The court held that there was no binding contract. Both parties were referring to different ships and there was no meeting of minds.

Legal Principle

Where contract terms are ambiguous and both parties reasonably interpret them differently, there is no consensus ad idem and no contract.

Illustration 3

Seller agrees to deliver goods at “Central Market”. Buyer assumes Accra Central Market. Seller assumes Kumasi Central Market. If both interpretations are reasonable, mutual mistake arises.

Case Authority

Falck v Williams (1900)

Facts Explained

An offer was sent by coded telegram without punctuation. The wording could refer to two different shipping contracts. The sender intended one route while the receiver understood another route.

Decision

The court held that since no objective meaning could be identified, no contract existed.

Case Authority

Scriven Bros v Hindley and Co (1913)

Facts Explained

At an auction, bales of hemp and tow were displayed. The samples were poorly distinguished. Hindley believed he was bidding for hemp but one lot was tow. He overbid and refused to pay.

Court Decision

The court held no contract existed due to mutual mistake. Both parties contributed to the confusion.

Case Authority

Tamplin v James (1880)

Facts Explained

The defendant bought an inn at auction believing adjoining land was included. The auction documents clearly showed otherwise. The defendant failed to read the documents carefully.

Court Decision

The court enforced the contract. There was no ambiguity. The mistake was self-induced.

Principle

Mutual mistake does not apply where contract terms are clear and one party simply failed to examine the documents.

6. Common Mistake

6.1 Meaning of Common Mistake

A common mistake occurs where both parties share the same false assumption regarding an essential fact underlying the contract.

Unlike mutual mistake, the parties are not disagreeing on meaning. Instead, both are wrong about reality.

6.2 Forms of Common Mistake

There are three main categories:

1. Mistake as to existence of subject matter
2. Mistake as to title
3. Mistake as to quality

7. Common Mistake as to Existence of Subject Matter

Case Authority

Couturier v Hastie (1856)

Facts Explained

Couturier agreed to sell corn believed to be in transit. Unknown to both parties, the corn had already deteriorated and been sold by the ship’s master before the contract.

Court Decision

The House of Lords held that the contract was void. There was no subject matter in existence at the time of contracting.

Principle

A contract for goods that do not exist at formation is void for common mistake.

Illustration 4

A buyer purchases a shipwreck salvage that has already been destroyed before contract signing. The contract is void.

Case Authority

McRae v Commonwealth Disposals Commission (1951)

Facts Explained

McRae won a government tender to salvage an oil tanker supposedly stranded on a reef. After spending money preparing salvage operations, McRae discovered no tanker existed.

Court Decision

Unlike Couturier, the court held the government liable. The Commission had represented the existence of the tanker and assumed responsibility for its existence.

Principle

Where one party guarantees existence, mistake does not void the contract. Liability arises.

8. Common Mistake as to Title

Case Authority

Cooper v Phibbs (1867)

Facts Explained

A leased a salmon fishery from B. Both believed B owned it. Later it was discovered A already owned the fishery.

Court Decision

The contract was set aside. One cannot lease property from oneself.

Equity Intervention

The court ordered compensation for improvements made.

Ghanaian Statutory Position

Section 10(1) of the Sale of Goods Act 1962 Act 137 implies a warranty of title. Normally lack of title leads to damages, not voidness, except where buyer already owns the goods.

9. Common Mistake as to Quality

Courts are reluctant to void contracts merely because parties were mistaken about quality or value.

Leading Authority

Bell v Lever Bros Ltd

Facts Explained

Bell was employed by Lever Bros. Unknown to the company, Bell had breached his duties. Lever Bros paid compensation to terminate his contract. Later they discovered the breach and sought to rescind the compensation agreement.

Court Decision

The House of Lords refused rescission. The mistake was not fundamental. Lever Bros got exactly what they bargained for which was termination of employment.

Lord Atkin’s Principle

Mistake as to quality voids a contract only where:

1. Both parties share the mistake
2. The mistake makes the subject matter essentially different from what was believed

Case Authority

Leaf v International Galleries

Facts Explained

Leaf bought a painting believed to be by Constable. Years later it was discovered to be a copy. He sought rescission.

Court Decision

The contract was upheld. The subject matter was the painting itself, not its authorship.

Case Authority

Nicholson v Smith-Marriott

Facts Explained

Napkins sold as royal relics turned out to be ordinary Georgian items. The buyer obtained something fundamentally different.

Court Decision

The contract was void for common mistake.

10. Mistake in Equity

10.1 Relationship Between Law and Equity

Equity follows the law. Where a contract is void at common law, equity also treats it as void.

However equity provides relief where the common law would enforce the contract harshly.

10.2 Equitable Remedies for Mistake

Equity may grant:

1. Rescission
2. Refusal of specific performance
3. Rectification

11. Rescission

Rescission sets aside a contract and restores parties to their original positions.

Where a mistake is insufficient to void the contract at law, equity may still allow rescission.

Limitation

Rescission will not be granted if third party rights have intervened.

Case Authority

Phillips v Brooks

A rogue obtained jewellery by pretending to be another person. The rogue sold the jewellery to an innocent purchaser.

The court held that the innocent buyer obtained good title. Rescission was barred.

Case Authority

Solle v Butcher

Both parties believed a flat was not rent controlled. It was later discovered to be controlled.

The lease was not void at law but equity allowed relief.

12. Refusal of Specific Performance

Specific performance is discretionary.

Courts refuse it where enforcing the contract would be unjust due to mistake.

Case Authority

Webster v Cecil

Seller mistakenly offered land at half price due to calculation error. Buyer accepted knowing the error.

Court refused specific performance.

Case Authority

Malins v Freeman

Buyer mistakenly bid for wrong property at auction.

Court refused specific performance because enforcement would be inequitable.

13. Rectification

Rectification corrects written documents to reflect true agreement.

Conditions for Rectification

1. There must be a genuine prior common intention
2. The intention must continue until execution
3. There must be a discrepancy between intention and written contract

Case Authority

Frederick E Rose Ltd v William Pim

Both parties mistakenly believed horse beans meant feveroles. The written contract accurately reflected horse beans.

Rectification was refused because the writing matched the agreement.

Case Authority

Joscelyn v Nissen

Father and daughter agreed orally that daughter would pay household expenses. Written agreement omitted this.

Court ordered rectification to reflect true intention.

Addai v Pioneer Tobacco Co. Ltd

Facts

The matter involved an ARA 4 land rover purchased by the plaintiff from the defendant. The plaintiff was prevented from taking ownership of the vehicle because it was found that the vehicle had been fitted with a new engine and the defendants had not intended to sell the car together with a new engine. The defendants demanded that the plaintiff pay extra for the new engine or they would return his money to him. 

The court found on the evidence that there had indeed been a mistake. The defendants at the time of accepting the plaintiffs bid did not know that the car had been fitted with a new engine. The plaintiff at the time of observing the car had noticed the new engine, motivating him to buy it. 

Court Reasoning

The court would not have rescinded the contract on the basis of the defendant’s mistake. However, it was found that the plaintiff had bid for several of the Land Rovers. The price difference between a lower-level range rover with an old engine and a newer model with a new engine was very little such that the plaintiff ought to have been aware of the mistake and was merely seeking to take advantage of it. 

Holding

There was a mistake and on the basis of equity, the contract was rescinded.

Mantrac Ghana Ltd v Batimat Ltd

Facts

The parties entered into a leasehold agreement, the defendant alleging that the written agreement was not a true reflection of the oral agreement between the parties. The plaintiff claimed it was a 5-year lease subject to renewal while the defendant alleged it was a 10-year lease. Both parties could not agree on when the two-year free rent period was to take place. 

The court of first instance relied on the defendant’s claim of mistake and rectified the contract accordingly to reflect the free rent period. The court presently held that the judge erred in doing so. 

Court Reasoning

The court observed that all the terms of the contract had already been spelt out in the contract. The judge was under a duty to merely give effect to those terms. The defendant had already been in occupation for one free year. They were therefore entitled to a refund for the free year they were yet to enjoy. 

Holding

There was no mistake for which the equitable jurisdiction of the courts had been invoked.

14. Summary Table of Mistake Under Ghana Contract Law

Type of Mistake	Nature	Legal Effect	Key Cases
Mutual Mistake	Parties attach different meanings to ambiguous terms	Contract void	Raffles v Wichelhaus, Falck v Williams
Common Mistake Existence	Subject matter does not exist	Contract void	Couturier v Hastie
Common Mistake Title	Buyer already owns property	Contract void	Cooper v Phibbs
Common Mistake Quality	Error about attributes or value	Usually valid unless fundamental	Bell v Lever Bros, Leaf v International Galleries
Unilateral Mistake	One party mistaken	Void only if identity or knowledge proven	Phillips v Brooks
Equitable Rescission	Relief despite valid contract	Contract voidable	Solle v Butcher
Rectification	Document error	Document corrected	Joscelyn v Nissen

Conclusion

Mistake remains a narrow but powerful doctrine in Ghanaian contract law. Courts balance certainty of contract with fairness. Only fundamental mistakes affecting the root of agreement render contracts void. Equity further intervenes to prevent injustice where strict legal rules would operate harshly.

Understanding mistake is essential for transactional lawyers, litigators, and judges because it determines when contracts bind parties and when justice demands relief.