penalty, for the breach of stipulations, all or some of which are, or one of which is, for the payment of a less sum, the sum made payable is really a penalty; only the actual damage can be recovered, and the stipulations cannot be severed. That is, although a stipulation has been broken, the damages for which are uncertain, only the actual damages can be recovered, because there is another stipulation for the payment of a smaller sum than the sum made payable as damages (n). 2. "When a single slump sum," said Lord WATSON (0), "is made payable by way of compensation, on the occurrence of one or more or all of several events, some of which may occasion serious and others but trifling damage, the presumption is that the parties intended the sum to be penal, and subject to modification." Lord ESHER (p) made the rule more extensive by substituting for " some of which may occasion serious and others but trifling damage," the words "some of which may occasion serious and others less serious damage," and the rule (as so altered) was followed by the Court of Appeal in Willson v. Love (q). In that case the lessees of a farm covenanted not to sell hay or straw off the premises during the last twelve months of the term, but to consume the same upon the premises, and the lease provided for an "additional rent of £3 per ton by way of penalty" for every ton of hay or straw so sold. It appeared that the value of hay for manure was from 15s. to £1 per ton, that of straw being from 4s. to 5s. less. It was held that the sum of £3 per ton was a penalty, and that the value for manure of the hay sold was the proper measure of damages. The court here was partly influenced by the description of the sum in the contract as a penalty. If the decision is to be treated as a direct decision on the rule laid down by Lord ESHER,

(n) Astley v. Weldon (1801), 2 B. & P. 346 ; In re Newman (1876), 4 Ch. D. 724.

(0) Elphinstone v. Monkland Iron and Coal Co. (1885), 11 App. Cas. 332, p. 342. Kemble v. Farran (1829), 6 Bing. 141, is generally treated, e.g., by Lord WESTBURY in Thompson v. Hudson (1869), L. R. 4 H. L. 1, p. 30, as an authority for this proposition. JESSEL, M.R., thought it was only an authority for the first proposition. See 21 Ch. D., p. 262.

(P) Willson v. Love, [1896] 1 Q. B. 626.

(9) SMITH, L.J., accepted the rule as doubted,

so altered; RIGBY, L.J.,

it settles a question which has long been agitated. The rule, as laid down by Lord ESHER, has the support of dicta by COLERIDGE, C.J., in Magee v. Lavell (r), and of JAMES and BRAMWELL, L.JJ., in In re Newman (s). On the other hand, the decision of the Court of Appeal in Wallis v. Smith (t), appears to be directly to the contrary. It seems clear, though the language of some of the judges is ambiguous, that the mere fact that the same sum is made payable on the breach of any one of several stipulations, where the stipulations are of substantially equal importance, is not enough of itself to show that the sum payable is a penalty (u). Where an agreement provided that A. should pay B. £100 per imperial acre for all land covered with slag and not levelled and soiled within a specified period, and that the payment should bear interest from the date when the obligation was unfulfilled, it is held that the payment was not penal. It had reference to a single obligation, and the sum to be paid bore a strict proportion to the extent to which that obligation was left unfulfilled (a). 3. Where a deposit is to be forfeited for the breach of a number of stipulations, some of which may be trifling or some of which may be for the payment of money on a given day, the bargain of the parties must be carried out (y).

(r) (1874), L. R. 9 C. P. 107, p. 111.

(8) (1876), 4 Ch. D. 724, p. 731.

(t) (1882), 21 Ch. D. 243, pp. 265, 269, 275.

(u) See per JESSEL, M.R., in Wallis v. Smith, supra, p. 265..

(x) Elphinstone v. Monkland Iron and Coal Co. (1885), 11 App. Cas.

332.

(y) JESSEL. M.R., in Wallis v. Smith, supra, p. 258.

CHAPTER XIX.

MISTAKE; MISREPRESENTATION.

MISTAKE.

MISTAKE forms a ground for the active interference of a court of equity in three classes of cases. First, equity exercises a concurrent jurisdiction with the common law by directing the return of money which has been paid by mistake. Here equity follows the law, and as a rule only allows a plaintiff to recover money paid by him where he paid it under the mistaken belief that an event had happened which imposed upon him a legal obligation to pay it. Secondly, equity sets aside a concluded contract where the parties have entered into it under a mutual mistake, and replaces them in their original state. Thirdly, equity rectifies a document by making it conform to the intention of the party or parties who executed it. Each of these subjects requires separate treatment (a).

This

I. The only action at law in which a plaintiff could set Recovery of money paid up mistake as a ground for relief was in the action for by mistake. money had and received by the defendant to his use. action, which was brought into importance by Lord MANSFIELD, was given wherever, in the opinion of the Court, it was inequitable that one person should retain money which he had received from, or for the use of, another. The courts of common law, in dealing with this action, introduced, in the beginning of last century, a distinction between mistakes of fact and mistakes of law. Money voluntarily paid under a mistake of fact can be recovered, unless the party paying intended to waive inquiry into

(a) Mistake may also be set up as a defence to an action for specific performance, and the cases where it is so relied on will be alluded to in this Chapter, in so far as they throw light on mistake as a cause of action.

Two kinds of mistake.

the facts. It may be recovered although the party paying had at the time of payment the means of knowing the facts, or had once had such knowledge but had forgotten the facts (b). The mistake must be as to a fact which, if it were true, would make the person paying legally liable to pay, and not as to a fact which, if it were true, would merely make it desirable in point of honour or of expediency that he should pay (c).. Money paid under a mistake of law cannot be recovered (d). Money paid under the pressure of legal process cannot be recovered, although it has been paid under a mistake of fact. The rule is not merely that money paid under a judgment cannot be recovered. The rule extends to all cases where money is paid after process taken out (e). But the rule does not apply where legal process is used mala fide, the person who receives payment knowing at the time that nothing is due to him (ƒ).

The principle that money paid under a mistake of law cannot be recovered applies equally where proceedings are taken in equity, if the action is in substance an action for money had and received (g). An exception has been introduced in recent times to the general rule. Money paid to a trustee in bankruptcy under a mistake of law can be recovered, because he is an officer of the court and the court ought to set an example (h). If the money paid has been distributed among the creditors, the amount may be recovered out of any moneys coming to the hands of the trustee and applicable for the payment of dividends (i).

II. In order to understand the effect of mistake as a ground for rescission, it is necessary to distinguish between two

(b) Kelly v. Solari (1841), 9 M. & W. 54; Milnes v. Duncan (1827), 6 B. & C. 671; Townsend v. Crowdy (1860), 8 C. B. (N.S.) 477; Durrant v. Ecclesiastical Commissioners (1880), 6 Q. B. D. 234. (c) Aiken v. Short (1856), 1 H. & N. 210.

(d) Bilbie v. Lumley (1802), 2 East, 469. See also Brisbane v. Dacres (1813), 5 Taunt. 143; Skyring v. Greenwood (1825), 4 B. & C. 281.

(e) Marriot v. Hampton (1797), 7 T. R. 269; Hamlet v. Richardson (1833), 9 Bing. 644; Moore v. Vestry of Fulham, [1895] 1 Q. B. 399. (f) Cadaval v. Collins (1836), 4 A. & E. 858; Ward v. Wallis, [1900] 1 Q. B. 675.

(g) Rogers v. Ingham (1876), 3 Ch. D. 351.

(h) Ex parte James (1874), 9 Ch. 609.

(i) Ex parte Simmonds (1885), 16 Q. B. D. 308.

kinds of mistake. A contract can never arise unless there is an outward expression by the one party of the terms. which he offers, and by the other of the terms which he accepts. It is not necessary that this expression should be in words. A contract may be expressed by acts as well as by words; and both acts and words may be interpreted either by the general course of trade, or by a particular course of dealing between the parties. Whether a contract is expressed in acts or in words, in words spoken or in words written, it is for the court to determine what each party meant by his expressions. The court in ascertaining that meaning interprets the acts and words of every individual by reference to a common standard; and a mistake may lie in a discrepancy between the inward offer or acceptance of one of the parties and his outward expression of it, whether visible or audible. The contracts with which courts of equity for the most part deal are intended to create a legal relation between the parties to the contract, e.g., the relation of vendor and purchaser, landlord and tenant, mortgagor and mortgagee, with reference to a specific subject-matter, e.g., a definite plot of land; and a mistake of another character may arise, either with reference to the legal relation or with reference to the subject-matter. The acts or words by which a party has expressed the offer or acceptance which he intended to make, may be in perfect conformity with his intention, but he may be mistaken as to the true nature of the legal relation into which he intended to enter, or of the subject-matter which he intended to affect. His mistake here lies in a discrepancy, not between his inward offer or acceptance and his outward expression, but between his conception of a legal relation and the consequences which the law attaches to that relation, or between his conception of the external world and the external world as it appears to the rest of mankind. If A. offers to sell Whiteacre to B. for £1,000, and in his offer writes sell when he meant let, or Whiteacre when he meant Blackacre, or £1,000 when he meant £2,000, his mistake lies in a discrepancy between his mental offer and his outward expression; and although B. accepts in the bona fide belief that A. meant