Lewis v Averay [1972] 1 QB 198

Key point

  • Lord Denning MR argues that unilateral mistake as to identity should render a contract voidable not void, but note that this rule was rejected by the House of Lords in Shogun Finance v Hudson

Facts

  • A third-party rogue pretended to be a famous actor to get Lewis (C) to accept payment by cheque for a car
  • Having obtained the car, the rogue pretended to be C and sold car to Averay (D)
  • When the cheque was declined, C discovered the fraud and sued D for the tort of conversion

Held (Court of Appeal)

  • Claim dismissed; D was not liable for conversion
  • There was no mistake as to identity, there was a valid contract under which title to the car had passed

Lord Denning MR

Discussion on unilateral mistake in obiter

  • Unilateral mistake as to identity renders a contract voidable, not void: p. 207A
  • An innocent purchaser should have right to property as he acted with complete circumspection and good faith, it was the seller let the rogue have the goods and thus enabled him to commit fraud: p. 207A

Current case (at p. 208C)

  • We look not at the subjective intentions of C or the rogue but at ‘outward appearances’
  • On the face of the dealing, C made a contract with the rogue
  • Even though there is fraudulent misrepresentation by the rogue, that renders the contract voidable, not void

Commentary

Voidable vs void

  • Voidable contracts
    • The contract is valid until it is rescinded
    • Thus, property passes under a voidable contract
    • The seller can rescind the contract and obtain restitution of the property sold, but this is a personal and not proprietary remedy
    • Rescission is barred if the property sold under the contract was sold to a third party bona fide purchaser without notice of the fraud/misrepresentation
  • Void contract
    • The contract is treated a null from the start and treated as though it never existed
    • Thus, property does not pass under a void contract

Balancing between defrauded seller and bona fide purchaser

  • Lord Denning MR’s approach favours the bona fide purchaser who purchases the property from the rogue, allowing him to obtain good title, whereas the prevailing approach favours the seller since the seller can retain title to property and sue the bone fide purchaser for conversion