Cundy v Lindsay - case summary PDF

Preview

Summary

case summary...

Description

Cundy v Lindsay (1877–78) is an English contract law case on the subject of mistake, introducing the concept that contracts could be automatically void for mistake to identity, where it is of crucial importance. Lindsay & Co were manufacturers of linen handkerchiefs, amongst other things. They received correspondence from a man named Blenkarn. He had rented a room at 37 Wood Street, Cheapside, but purported to be 'Blenkiron & Co'. Lindsay & Co knew of a reputable business of this name which resided at 123 Wood Street. Believing the correspondence to be from this company, Lindsay & Co delivered to Blenkarn a large order of handkerchiefs. Blenkarn then sold the goods – 250 dozen linen handkerchiefs – to an innocent third party, Cundy. When Blenkarn failed to pay, Lindsay & Co sued Cundy for the goods. The House of Lords held that Lindsay & Co had meant to deal only with Blenkiron & Co. There could therefore have been no agreement or contract between them and the rogue. Accordingly, title did not pass to the rogue, and could not have passed to Cundy. They were forced to therefore return the goods. As such, the contract was held void, rather than voidable. This has introduced a distinction from cases such as Phillips v Brooks, where parties dealing face to face are presumed to contract with each other.

Shogun Finance Ltd v Hudson [2003] is an English contract law case decided in the House of Lords, on the subject of mistaken identity as a basis for rescission of a contract. The case has been the subject of much criticism in failing to effectively clarify the area of mistake to identity. Facts A rogue went to a dealer to buy a Mitsubishi Shogun on hire purchase. The rogue told them that his name was Mr Patel and produced Mr Patel’s driving licence. The dealer communicated with Shogun Finance, which did a credit check on Mr Patel. Finding no problems, Shogun Finance authorized the hire purchase agreement and the rogue drove away. The rogue then sold the car to Mr Norman Hudson, who had no knowledge that the vehicle belonged to Shogun Finance and was subject to an apparent hire purchase agreement. Shogun Finance brought a claim against Mr Hudson for the return of its

vehicle. Mr Hudson relied on section 27 of the Hire Purchase Act 1964, which creates a statutory exception to the common law principle that "nemo dat quod non habet" (nobody can pass better title than he has), since a non-trade buyer of a car who buys in good faith from a hirer under a hire purchase agreement becomes the owner. In a 3-2 decision, the majority of the House of Lords held there was no contract of hire purchase between Shogun Finance and the rogue, section 27 of the Hire Purchase Act therefore did not apply and the car was not Mr Hudson's. Lord Hobhouse, Lord Phillips and Lord Walker followed the principle established in Cundy v Lindsay, a contract where identity is of key importance is void if the purchaser lies about their identity. The face-to-face exemption established by Phillips v Brooks Ltd did not apply because the seller was not the dealer but the finance company. Lord Nicholls and Lord Millett dissented, arguing that a better policy would be to remove the face-to-face distinction and protect the good-faith purchaser in all cases: “ [This] is in line with the direction in which, under the more recent decisions, the law has now been moving for some time. It accords better with basic principle regarding the effect of fraud on the formation of a contract. It seems preferable as a matter of legal policy. As between two innocent persons the loss is more appropriately borne by the person who takes the risks inherent in parting with his goods without receiving payment. This approach fits comfortably with the intention of Parliament in enacting the limited statutory exceptions to the proprietary principle of nemo dat quod non habet.” The result of Shogun Finance Ltd v Hudson is that the area of mistake to identity retains the 'face to face' distinction: contracts of immediate vicinity differ from contracts made over distance. Such a distinction has been labelled "artificial and unfair" to third parties, who bear the entire loss if, at least in the instant case, it is argued that Shogun Finance Ltd had far better means to uncover the rogue's fraud than the independent purchaser; in any case, the original seller is usually in the better position to protect and insure against such risks....