Solle v Butcher [1950] 1 KB 671

Facts

• The case involved a lease agreement where the landlord (defendant) sought to raise the rent of a flat from £140 to £250 per year, mistakenly believing the flat was not subject to rent control under the Rent Acts.
• The tenant (plaintiff) initially agreed to the higher rent but later sought restitution of the overpaid rent after realizing the legal position.
• The landlord counterclaimed for rescission of the lease on the basis of common mistake.
• The Court of Appeal, with Denning LJ delivering the leading judgment, considered whether the lease could be set aside due to a shared mistake regarding the applicability of rent regulations.

Issues

1. Whether a contract entered into under a shared fundamental mistake regarding a material fact or law should be treated as void or voidable.
2. Whether an equitable jurisdiction exists, separate from the common law, to set aside contracts for fundamental mistake even when not void at common law.
3. How the relationship between common law and equity should influence the doctrine of mistake in English contract law.

Decision

• The Court of Appeal held that the contract (lease) was voidable in equity due to the fundamental shared mistake about the rent control regulations.
• Denning LJ found that, although the lease was not void at common law, equity could set it aside where it would be unfair for one party to take advantage of another's mistake.
• The lease was set aside, allowing the landlord to re-let the property at the intended rent and preventing the tenant from benefiting from the mistake.
• This decision applied Denning LJ’s two-tiered approach: strict limits for common law mistake (voidness) and a broader equitable doctrine (voidability) for fundamental misapprehensions.

Legal Principles

• Prior to the Judicature Acts, common law and equity had distinct rules for mistake: common law allowed contracts to be void only in narrow cases (e.g., non-existent subject matter), while equity could offer relief in a broader range of fundamental mistakes.
• Denning LJ proposed that equity could set aside contracts for fundamental mistake if: (1) the misapprehension was fundamental; and (2) the party seeking relief was not at fault.
• A contract rendered voidable in equity ensured relief could be granted without injustice to third parties, contrasting with the rigid approach of common law.
• Denning LJ’s equitable doctrine was subsequently rejected by the Court of Appeal in Great Peace Shipping v Tsavliris Salvage [2002] 3 WLR 1617, which reaffirmed that common law mistake alone could render contracts void, preserving certainty and predictability.
• The distinction between void and voidable contracts was reaffirmed as critical to the doctrine of mistake, with equitable intervention seen as inconsistent with the House of Lords’ decision in Bell v Lever Bros [1932] AC 161.

Conclusion

Solle v Butcher [1950] 1 KB 671 marked a significant judicial attempt to introduce flexible equitable relief for contracts affected by fundamental mistake, but its equitable doctrine—allowing for contracts to be voidable instead of void—was ultimately rejected, restoring the primacy and rigidity of the common law approach to contractual mistake in English law.