Mistake Archives - Case Judgments

Petelin v Cullen (1975) is a contract law case from Australia that threw light on the defense of non est factum.

Given below are the case details.

Case name & citation: Petelin v Cullen [1975] HCA 24; (1975) 132 CLR 355

Court: High Court of Australia
Decided on: 17 July 1975
The bench of judges: Barwick C.J., McTiernan, Gibbs, Stephen and Mason JJ.
Area of law: Defense of non est factum; Contract for sale of land

What happened in Petelin v Cullen?

Petelin was the owner of the land at Liverpool. He spoke little English and couldn’t read English. He received a sum of $50 from Cullen and, in exchange, gave Cullen an option to purchase his land at a specified price. The option was valid for six months. Six months lapsed. Cullen, through his agent, then wrote a letter to Petelin enclosed with another check of $50 to seek his agreement on the extension of the option for a further period of six months.

Cullen’s agent, Mr. Clements then saw Petelin and asked him if he received the $50 and the letter. Mr. Clements said, “Sign it that you received $50.” Petelin signed the letter, thinking it to be a receipt for the second payment. But the document was actually an extension of the option that had lapsed.

Cullen attempted to exercise the extended option but Petelin refused to make the sale.

Cullen sued for the enforcement of the contract, seeking specific performance in the Supreme Court of New South Wales. The Supreme Court dismissed the action on grounds that Petelin was entitled to the defense of non est factum and an appeal was made to the NSW Court of Appeal. The NSW Court of Appeal overturned the Supreme Court decision and granted an order for specific performance. Petelin then appealed to the High Court of Australia.

Decision of the High Court

The High Court denied ordering specific performance.

The basis for the decision was a unilateral mistake as to the nature of the document signed by Petelin. The document was substantially different from what he believed he was signing.

In regard to the defense of non est factum, the High Court stated certain criteria for a person to be able to rely on this defense.

“It is available to those who are unable to read owing to blindness or illiteracy and who must rely on others for advice as to what they are signing; it is also available to those who through no fault of their own are unable to have any understanding of the purport of a particular document.

To make out the defense a defendant must show that he signed the document in the belief that it was radically different from what it was in fact and that, at least as against innocent persons, his failure to read and understand it was not due to carelessness on his part.

Finally, it is accepted that there is a heavy onus on a defendant who seeks to establish the defense.” (at p360)

Petelin believed he was signing a receipt when actually it was an extension of the period of option. He was poor in English and couldn’t read and understand English. There was no carelessness on his part in failing to take reasonable precautions because it was beyond his capacity to understand the document and he relied on what he was told by Mr. Clements. Taking it to a solicitor would have been too difficult for him.

Furthermore, whether his signing of the document was due to his carelessness was not a relevant issue here because it appears from the circumstances that Cullen’s conduct was not innocent.

The High Court held that:

“It is scarcely to be conceived that the respondent was unaware of what his agent said and did; but even if he was not informed by the agent, he must take responsibility for his action. Consequently, as against the appellant, the respondent is not to be considered as an innocent person without knowledge or reason to doubt the validity of the appellant’s signature.” (at p360)

“There are other reasons why it would be inappropriate to treat the respondent as an innocent party. It became apparent to Mr. Clements when the original option was negotiated that the appellant had little appreciation of English and no capacity to understand the option agreement.” (at p361)

Based on the above grounds, the principle of “non est factum” applied which rendered the contract void ab initio.

Non est factum

This is a legal principle that applies to a unilateral mistake made by a party signing a document where the document is fundamentally and radically different from what the party believed he or she was signing. When “non est factum” is established, the contract becomes void ab initio.

References:

Petelin v Cullen [1975] HCA 24 – barnet jade. (n.d.). https://jade.io/article/66529

Petelin v Cullen [1975] HCA 24: 17 July 1975. Legal Helpdesk Lawyers. (2015, February 26). https://legalhelpdesklawyers.com.au/2014/07/17/petelin-v-cullen-high-court-of-australia-17-july-1975/

The application of the defence of non est factum: An exploration of its … (n.d.). http://classic.austlii.edu.au/au/journals/UWSLawRw/2009/4.pdf

Petelin v Cullen (1975) 132 CLR 355. Law case summaries. (2019, March 10). https://lawcasesummaries.com/knowledge-base/petelin-v-cullen-1975-132-clr-355/

StudentVIP. (n.d.). https://s3.studentvip.com.au/notes/6686-sample.pdf

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More from contract law:

Taylor v Johnson (1983) is a famous contract law case on the issue of unilateral mistake. The case involved an offer to purchase land and a dispute over its purchase price.

Given below are the case details:

Case name & citation:	Taylor v Johnson [1983] HCA 5; (1983) 151 CLR 422
The concerned Court:	High Court of Australia
Decided on:	23 February 1983
The bench of judges:	Mason A.C.J., Murphy, Deane and Dawson JJ.
Area of law:	Contract of sale of land; Unilateral mistake

Facts of the case (Taylor v Johnson)

Two parties, Johnson and Taylor, were involved in a land transaction. Johnson offered to sell Taylor (or his nominee) approximately ten acres of land for $15,000. Taylor exercised the option and a contract of sale was entered into. The purchase price was again stated as $15,000. Johnson later claimed that she believed that the consideration expressed in the documents was $15,000 per acre of land and not $15,000 for the entire ten-acre land.

Thus, a dispute arose between the two parties and Taylor sought to enforce the contract based on the price indicated in entirety.

Issue

Could the contract be invalidated based on Johnson’s mistaken belief regarding the price?

The case went through legal proceedings at multiple stages. Below are the details of what happened:

At trial (Taylor v Johnson)

The trial judge accepted that Johnson was mistaken about the purchase price of land, thinking it to be $15,000 per acre. However, the trial judge found that Taylor was not aware of this mistake. Hence, specific performance was ordered meaning that the contract should be enforced as written.

Johnson appealed to the New South Wales Court of Appeal.

Court of Appeal

The Court of Appeal found that Taylor was indeed aware of Johnson’s mistake and as a result, reversed the findings of the trial judge. The Court upheld Johnson’s appeal and set aside the contract of sale.

Dissatisfied, Taylor appealed to the High Court of Australia.

High Court’s decision in Taylor v Johnson

The High Court, by a majority decision, dismissed Taylor’s appeal.

The High Court found that Taylor’s knowledge of the mistake was a crucial factor and that the New South Wales Court of Appeal was open to reaching a different conclusion than that reached by the trial judge.

It was found that Taylor was aware that while agreeing to the sale of land for $15,000, Johnson was acting under a mistake as to its price or value.

Further, Taylor deliberately ensured that Johnson was not disabused of her mistake. He knew that the price was exceptionally favorable but said nothing and rather accepted the offer quickly.

Based on the facts and inferences, the Court found that there was a unilateral mistake related to a term of the contract, i.e., the purchase price. The majority held that the contract was nevertheless not void at common law but concluded that Johnson could set it aside on grounds of equity. That is, she was entitled to set aside the contract on equitable grounds.

Ratio decidendi

In situations where one party (Taylor) is aware that the other party (Johnson) has made a serious mistake regarding a fundamental term of the contract and takes deliberate actions to prevent the mistaken party from discovering the error until it’s too late, the contract can be declared void. This is because it goes against principles of good conscience for the party who knowingly ignores signs of the mistake and acts to prevent discovery of the error to enforce such a contract.

Quotes from the case

As per Mason A.C.J., Murphy, Deane JJ.

“It is that a party who has entered into a written contract under a serious mistake about its contents in relation to a fundamental term will be entitled in equity to an order rescinding the contract if the other party is aware that circumstances exist which indicate that the first party is entering the contract under some serious mistake or misapprehension about either the content or subject matter of that term and deliberately sets out to ensure that the first party does not become aware of the existence of his mistake or misapprehension.”

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