- Bell v. Lever Brothers Ltd.
Bell v Lever Brothers Ltd. [Case citation|  ALL E.R. Rep. 1,  A.C. 161] is a leading
House of Lordsdecision on " common mistake" in contract law.
During March 1929 the N. Company, which dealt in trade in the western
African area, was merging with a rival company and wanted to get rid of two employees Mr. Bell and Mr. Snelling, who were hired as chairman and vice-chairman of the company. Chairman Francis D'Arcy Cooper on behalf of Lever Brothersmade a deal with Bell and Snelling to leave the company in exchange for a sizable compensation (a " Golden handshake"). At the time of the agreement both parties believed that the employment contract had not been breached and thus the company would not have been able to terminate Bell and Snellings' employment under any other circumstances. It was later revealed that there was in fact grounds for termination at the time of the agreement as Bell and Snelling had used their positions to make a secret profit for themselves.
D'Arcy Cooper — a senior partner with his uncle's accountancy firm Cooper Brothers and staunch
Quaker— became chairman of audit client Lever Brothersin the early 1920s. He was hired by Lord Leverhulmewhen the banks were threatening to call the loans on the company due to devastating losses incurred by the newly acquired Niger Company that crippled Lever Brothers. Cooper arranged financing from Barclays Bankunder the condition that professional management would be put in place at the Niger Company. Ernest Hyslop Bell — a personal friend of D'Arcy Cooper and senior manager at Barclays — was hired in 1923 to be chairman of the Niger Company. Snelling was appointed vice-chairman. He was an independent tax consultant who had previously turned a large tax claim into a tax refund for Lever Brothers in 1921 at a time when the company was strapped for cash.After Bell and Snelling reversed the Niger Company fortunes it was merged with its previously dominant competitor African and Eastern to form the United Africa Company. Bell had fully anticipated he would be asked to lead the newly merged company until Mr Cooper informed him otherwise which greatly upset Bell as he had left a safe job at Barclays Bank, had turned around the business to the point where it could be merged on equal terms with its main competitor and at 54 years of age was too old to get another position in the City. Over lunch at the Savoy Grill it was agreed they would get a sizeable compensation package that would allow Bell to retire.
Shortly after their resignation it was discovered that Bell and Snelling had traded on inside information obtained from the cocao cartel about impending price reductions by selling cocao forward for their personal account.
Trial at first instance
Lever brought an action claiming
rescissionof the compensation agreement because of mistake of fact.
At trial the jury found that Bell and Snelling's illicit dealings breached the employment contract and that if the
Lever Brothershad known they would not have entered into the agreement. Furthermore, the jury found that at the time of the agreement Bell and Snelling did not have in mind their illicit acts. Lever Brotherspursued the case vigorously as it considered the behavior of Bell and Snelling simply unacceptable.
House of Lords Ruling
On appeal, the House of Lords found 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::"A mutual mistake as to some fact which, by the common intention of the parties to a contract, whether expressed or implied, constitutes the underlying assumption without which the parties would not have made the contract they did, and which, therefore, affects the substance of the whole consideration, is sufficient to render the contract void."Effectively, the mistake must nullify or negative consent of the parties in order for the agreement to be void.
In order for the contract to be void by mutual mistake the mistake must involve the actual subject-matter of the agreement and must be of such a "fundamental character as to constitute an underlying assumption without which the parties would not have entered into the agreements".
From the facts the Court found that the mistake as not sufficiently close to the actual subject-matter of the agreement. The parties got exactly what they had bargained for.
The case put a high standard on the finding of "common mistake". This was criticized in the later cases written by
Lord Denningsuch as in " Solle v Butcher" where Denning reduced the standard in order the make the agreement voidableon "common mistake". Subsequently in " Great Peace Shipping Ltd v Tsavliris Salvage (International) Ltd" (2002) the Court of Appeal overturned Denning and set the standard for common mistake in line with the original "Bell v Lever Brothers" standard.
Also in "
Scottish Co-operative Wholesale Society Ltd. v. Meyer"  AC 324, Lord Denning remarked the following, in the context to the equivalent of an unfair prejudiceaction under UK company law. "Your Lordships were referred to "Bell v. Lever Brothers Ltd.", where Lord Blanesburgh said that a director of one company was at liberty to become a director also of a rival company. That may have been so at that time. But it is at the risk now of an application under section 210 if he subordinates the interests of the one company to those of the other."
* MacMillan, C. "How temptation led to mistake: an explanation of Bell v Lever Brothers, Ltd" Law Quarterly Review 2003, 119(OCT) 625-659
* [http://www.bailii.org/uk/cases/UKHL/1931/2.html Full text at BaiLII.org]
Wikimedia Foundation. 2010.
Look at other dictionaries:
Scottish Co-operative Wholesale Society Ltd. v. Meyer —  AC 324 is a UK company law case, concerning the predecessor of the unfair prejudice provision, an action for oppression under s.210 Companies Act 1948 (now s.994 Companies Act 2006). It was decided in the House of Lords, by Viscount… … Wikipedia
Scottish Co-operative Wholesale Society Ltd v Meyer — Scottish Co operative Wholesale Society Ltd. v. Meyer  AC 324 is a UK company law case, concerning the predecessor of the unfair prejudice provision, an action for oppression under s.210 Companies Act 1948 (now s.994 Companies Act 2006). It … Wikipedia
Mistakes in English law — Mistake is a term of art in both contract law and criminal law in England and Wales. Contents 1 Contract law 1.1 Common mistake 1.2 Mutual mistake 1.3 Unilateral mistake to identity … Wikipedia
Mistake in English law — is an English contract law doctrine which sets out the conditions on which a contract may become void. A mistake is an incorrect understanding by one or more parties to a contract and may be used as grounds to invalidate the agreement. Common law … Wikipedia
English contract law — is an influential system regulating the law of contract that operates in England and Wales. Its doctrines form the basis of contract law across the Commonwealth, including Australia, Canada, India, New Zealand and South Africa and more generally… … Wikipedia
Mistake (contract law) — In contract law, a mistake is an erroneous belief, at contracting, that certain facts are true. It can be argued as a defence, and if raised successfully can lead to the agreement in question being found void ab initio or voidable, or… … Wikipedia
Chandler v Webster — Court Court of Appeal Citation(s)  1 KB 493 Judge(s) sitting Lord Collins MR, Romer LJ and Mathew LJ … Wikipedia
Courturier v Hastie — Court House of Lords Citation(s)  UKHL J3, (1856) 5 HLC 673 … Wikipedia
James Atkin, Baron Atkin — James Richard Atkin, Baron Atkin (November 28, 1867 June 25, 1944) was a lawyer and judge of Australian Welsh origin who practised in England and Wales. He always thought of himself as a Welshman.Lewis (2004)] Early life and practiceHis parents… … Wikipedia
R v. Hinks — English case infobox name= R v. Hinks court=House of Lords date decided=26 October 2000 full name=Regina v. Hinks citations=  UKHL 53;  3 WLR 1590 judges=Lord Slynn of Hadley, Lord Jauncey of Tullichettle, Lord Steyn, Lord Hutton,… … Wikipedia