Shogun Finance Ltd v. Hudson

Shogun Finance Ltd v. Hudson

[2004] 1 All ER 215

(Mistake as to identity)

FACTS:

A dealer agreed a price for the sale of motor vehicle on hire-purchase to a fraudster who produced stolen driving license of Mr. Patel and forged the signatures. Having completed a satisfactory credit check of Patel, SF approved the sale on HP. Fraudster then sold the car to H who purchased it in good faith. When SF came to know of fraud, it claimed mistake as to identity making its contract with fraudster void and hence claimed back car from H.

ISSUE(S):

Whether agreement between Shogun and fraudster was void on account of mistake as to identity or merely voidable on account of fraudulent misrepresentation?

HELD:

“An offer can be accepted only by the one to whom it is addressed: (Boulton v. Jones) Offer and acceptance should be understood in objective sense. Test should not be merely ‘did the offeror intend to contract with the person to whom offer was made?’ rather test should be ‘how would a reasonable person in the position of offree have interpreted the offer?’ So if A makes an offer to B in mistake for C and B reasonably believing that the offer is intended for him, accepts, then A is bound even though he can prove that he made a mistake.

But no contract will be formed when a person accepting an offer believes on reasonable grounds that he is accepting an offer from someone other than the person by whom it has in fact been made, i.e. when A disguises himself as C and enters into an agreement with B, who reasonably believes him to be C, then agreement is void. (Cundy v. Lindsay) This is because of the fact that B never thought of A and never intended to deal with him. Their minds were never in consensus and thus a contract was never formed.

However, if a party’s mistake doesn’t go to the identity of the other party, i.e. if it is mistaken only about the attributes and not identity per se, then contract is valid and subsisting. Law distinguishes between cases where there are two individuals in the picture (A contracts with B in mistake for C) and where there is only one (A contracts with B in belief that B isn’t B). In former, contract is void but in latter it is not because in order to establish mistake as to identity, the party contracting must prove that it wanted to contract only with the person with whom it stipulated the agreement to be but turned to be otherwise. (King Norton Metal Co. Ltd. v. Edridge)

All these principles aptly apply in cases where the contracts are wholly in writing, identity of the parties to be established by written contract only. If the agreement is unequivocal and clear as to who parties to contract are, then extrinsic or oral evidence can’t be adduced to contrary. (Hector v. Lyons)

However, where the parties don’t conclude their contracts in writing, nor through communications at distance, but deal face to face, there is a strong presumption that each intended to deal with the ‘person present and identified by sight and hearing’ (Phillips v. Brooks) But such a presumption is a rebuttable one on fact-to-fact basis (Ingram v. Little)”

HP agreement was void in this case. Since the contract was in writing, the identity of parties could be determined w.r.t. written agreement only. Hence such agreement could be made only between Shogun and Patel which wasn’t possible because Patel knew nothing of it and hadn’t signed the agreement.

The claim of Hudson that it is not identity but security that is at the heart of making the HP contract with someone who is financially sound wasn’t entertained as in HP contracts, identity is an essential element:

a)     HP agreement are consumer credit agreement, wherein the identity of the person is fundamental to the whole transaction because it is essential to the checking of the credit rating of the applicant borrower

b)    The company was not willing to do business with any person, rather it wanted to do business only with the person whose credit worthiness they had checked

c)     King’s Norton Metal Co. v. Edridge case distinguished as “it was not the use of ‘simple alias’ to disguise the purchaser rather than to deceive the vendor” Credit check can only be run against the person who is named in the document and not anyone. Hence, there is intention to deal with only that person who is named in the document.

Conclusion:  Since Shogun wanted to deal only with Mr.Patel whose creditworthiness it had checked, therefore there was never a consensus between Shogun and fraudster for identity formed essence of the contract. Hence, the contract was void.

 

Author: Vishrut Kansal (National University of Juridical Sciences, Kolkata)