English High Court Provides Guidance On When A Common Mistake Will Render A Contract Void

Introduction

One of the most fundamental purposes (and indeed contractual legal principles) of a contract is that its terms should be certain, such that each party to the contract knows what it is signing up to and the terms by which it must abide. However, in some instances, it may be the case that the parties agree to the terms of a contract on the basis of a shared mistaken assumption about a fact which is integral to the contract. In such circumstances, the equitable doctrine of "common mistake" may be used as a defence and, if successful, render the contract void.

In the recent case of Triple Seven MSN 27251 Limited & another v Azman Air Services Limited1, the English High Court held that the doctrine of "common mistake" did not apply and the contracts in question were not void. In reaching its decision, the court provided some useful guidance on how this doctrine will be assessed and applied by the English courts.

Background

Two members of the Triple Seven group of aircraft leasing companies (the "Claimants") entered into two five-year aircraft leases with Azman Air Services Limited (the "Defendant"), whereby the Defendant would rent two Boeing 777 airliners. It was understood by the parties that the aircraft would be used to transport passengers from Nigeria to Saudi Arabia for the Hajj and Umrah pilgrimages. However, hours after signing the contracts, the Defendant received a letter from the General Authority of Civil Aviation of Saudi Arabia (the "GACA") excluding it from participating in the 2016 Hajj airlift.

Within the first two weeks of executing the contracts, the Claimants tendered the aircraft for delivery to the Defendant. However, the Defendant refused to accept delivery of the aircraft on the basis that it was no longer able to participate in the 2016 Hajj airlift. The Claimants therefore terminated the leases and sued for damages arising from the Defendant's non-performance of such leases.

The Defendants had pleaded a number of defences to this claim but, by the time of the trial, the only substantive defence advanced was that the lease agreements were void at common law for "common mistake".

The High Court's analysis of the defence of common mistake

In his judgment, the judge considered the test for common mistake, as had been stated and clarified by the Court of Appeal in Great Peace Shipping Ltd v Tsavliris Salvage (International ) Ltd2. In that case, the court held that the mistaken common assumption between the...