Judicial Relief of Mistake - OT Africa re Vickers (Part B)

by Peter F.M. Jones (Paterson, MacDougall LLP)

If you decided that Vickers was stuck with the offer made by their lawyers, although mistakenly in Pounds Sterling instead of U.S. Dollars, then you were in good company: the English judge also decided in favour of OT Africa Line (OTAL). He followed well-established English case law that a contract will rarely be set aside because one of the parties made a mistake when agreeing to a commitment in the contract. In interpreting a contract, a common law court decides what commitments are binding on the parties by “objectively” analyzing what the contractual terms. This analysis ignores the circumstance that a party made a mistake and intended to contract on a different basis. That party can only avoid the consequences of its mistake by showing that the other party knew or ought to have known of the mistake. As the OTAL case shows this burden is not easy to discharge.

Vickers referred to "sharp practice" a reference to the speed of OTAL’s lawyer in accepting the offer of settlement without clarifying why the offer was expressed in Pounds sterling and not in USD, the currency used for all other settlement proposals in the course of the negotiations. Vickers pointed out that there had been no prejudice to OTAL as the offer was promptly withdrawn, and OTAL could continue with its preparations for trial if it chose to do so. True enough, but Vickers now had a better idea of OTAL’s "bottom line", and if it could withdraw its mistaken offer Vickers had an opportunity at least to negotiate a settlement at a lesser amount.

The judge did not consider that it was unreasonable for OTAL’S lawyer to take the offer at its face value, even though it was substantially higher than previous offers after conversion of the currency (£ sterling) in which the offer was expressed. There was nothing in the letter communicating the offer to explain why Vickers had chosen to increase its settlement amount from its previous final offer, or express its offer in the sterling currency. This information might have put OTAL’s lawyer on notice of the possibility of a mistake.

Perhaps the judge was influenced by the circumstance that there was little excuse for the conduct of Vickers in placing loose cargo (submachine guns) inside a larger unit and not declaring them to OTAL. Perhaps the judge was prepared to be stricter on negotiations between lawyers than negotiations between commercial managers.

So OTAL won, and Vickers lost. Some judicial sages consider that where there is a settlement both parties win, and their lawyers lose.

Don't feel sorry for Vickers: given the circumstances it is quite likely that the law firm responsible for the error would come to some accommodation with its client.

March 2, 2010