17 January 2012 | Simon Carrington

A genuine bargain or a genuine mistake?

In the law of contract, there are a number of circumstances in which a party can be relieved from its obligations. One of these circumstances is unilateral mistake.

A unilateral mistake is where one party is mistaken as to a term of the contract (and not the subject matter of the contract itself, for example the quality of goods) and the other party knows about the mistake (or ought to have) and takes advantage of that error by snapping up the offer and demanding the agreement be enforced.

In this case, the parties had discussed entering into a contract for the sale of hare skins for a certain amount of money. But when the defendants went to document the agreement, they offered the skins at an incorrect price by mistake, effectively offering them at around a third of what the parties had originally discussed. The claimant tried to hold the defendants to their good offer.

The court held that in the circumstances, the claimant could not reasonably have thought that the defendants’ offer matched the defendants’ true intention for the price (as the terms, including price, had already been discussed). Therefore, the claimant must have realised the defendants’ error. As the error concerned a term of the contract and one which was significant, then the contract was rendered void.

Within the age of the internet, circumstances like the above have become increasingly common. Internet sites can sometimes offer goods or services at an extremely low price by mistake. In September 1999, well known retailer Argos faced legal action when, due to a computer software error, it appeared to offer customers a television for just £3 on its online store. Its defence, which was upheld, was to use the established case law principles that a party could avoid contractual liability if that party could prove there was a mistake and that the mistake was known to the other party or ought to have been.

To avoid disputes, a retailer offering goods or services for sale on its website should ensure that the order process is designed in such a way that an order placed by a customer is an offer only and will be accepted (and a valid contract formed) when the goods are despatched (confirmation of which normally comes in a despatch note).

☛ Simon Carrington is an associate at Squire Sanders.