Bell v Lever Brothers Ltd [1931]
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Bell v Lever Brothers Ltd [1931] UKHL 2 is a notable English contract law case decided by the House of Lords. The case primarily deals with the concept of mistake in English law and establishes that a common mistake does not render a contract void unless the mistake is fundamental to the identity of the contract.
Lever Brothers Ltd, later known as Unilever, was experiencing challenges in its West Africa trade conducted through a subsidiary, the Niger Company. Lord Leverhulme, the owner of Lever Bros, hired D'Arcy Cooper to manage the crisis, who subsequently appointed Ernest Hyslop Bell as the chairman of the subsidiary. Bell played a crucial role in turning the company profitable. When the company merged to form the United Africa Company in 1929, Bell, who wanted to lead the new entity, agreed with Cooper on a compensation package (£30,000) and retirement. However, it was later revealed that Bell, along with another executive, Mr Snelling, had engaged in illicit dealings as part of a regional cocoa cartel, selling cocoa based on inside information. Lever Brothers Ltd sought rescission of the compensation package, claiming mistake of fact.
The trial before Wright J and a City of London Special Jury found that Bell and Snelling's illicit activities breached the employment contract and that if Lever Brothers had known, they would not have entered into the agreement. The compensation agreements were held void.
On appeal to the House of Lords, the majority, led by Lord Atkin, held that there was no mistake, and the contract could not be rescinded nor was it void on mistake. The Court identified the mistake as a common mistake, emphasising that for a contract to be void due to a common mistake, the mistake must involve the actual subject matter of the agreement and be of such a fundamental character that it constitutes an underlying assumption without which the parties would not have entered into the agreement.
The Court found that the mistake in this case was not sufficiently close to the actual subject matter of the agreement. The parties received exactly what they had bargained for, and the mistake did not nullify or negatively impact the consent of the parties.
Lever Brothers Ltd, later known as Unilever, was experiencing challenges in its West Africa trade conducted through a subsidiary, the Niger Company. Lord Leverhulme, the owner of Lever Bros, hired D'Arcy Cooper to manage the crisis, who subsequently appointed Ernest Hyslop Bell as the chairman of the subsidiary. Bell played a crucial role in turning the company profitable. When the company merged to form the United Africa Company in 1929, Bell, who wanted to lead the new entity, agreed with Cooper on a compensation package (£30,000) and retirement. However, it was later revealed that Bell, along with another executive, Mr Snelling, had engaged in illicit dealings as part of a regional cocoa cartel, selling cocoa based on inside information. Lever Brothers Ltd sought rescission of the compensation package, claiming mistake of fact.
The trial before Wright J and a City of London Special Jury found that Bell and Snelling's illicit activities breached the employment contract and that if Lever Brothers had known, they would not have entered into the agreement. The compensation agreements were held void.
On appeal to the House of Lords, the majority, led by Lord Atkin, held that there was no mistake, and the contract could not be rescinded nor was it void on mistake. The Court identified the mistake as a common mistake, emphasising that for a contract to be void due to a common mistake, the mistake must involve the actual subject matter of the agreement and be of such a fundamental character that it constitutes an underlying assumption without which the parties would not have entered into the agreement.
The Court found that the mistake in this case was not sufficiently close to the actual subject matter of the agreement. The parties received exactly what they had bargained for, and the mistake did not nullify or negatively impact the consent of the parties.
