Lever Brothers Ltd (which merged in 1930 to become Unilever) was a company which traded in West Africa, through a 99% owned subsidiary called the Niger Company (formerly the Royal Niger Company). The Niger trade was in trouble. Lord Leverhulme, the owner of Lever Bros, hired D'Arcy Cooper (a Quaker and senior partner of his uncle's accountant firm, Cooper Brothers) to be the chairman and manage the crisis. Cooper negotiated a loan from Barclays Bank, which insisted that a professional management run the Niger subsidiary. Cooper hired his friend, Ernest Hyslop Bell, a senior Barclays manager in 1923 as chairman of the subsidiary. Mr Snelling, a tax consultant that had successfully got Lever Bros a big tax refund in 1921, was appointed as vice chairman. They did well, and turned a profit. The company was then merged with a former competitor (African and Eastern Trade Corporation) to form the United Africa Company in 1929.
Bell had wanted to run the new United Africa Company, because he was too old at 54 to have a job in the City, and he had left his Barclays position. At lunch in the Savoy Grill he agreed with Cooper that he would get a big compensation package (£30,000) and retire. A similar "golden parachute" of £20,000 was given to Mr Snelling. However, shortly after, it was revealed that Bell and Snelling had been part of a regional cocoacartel, and used information on future price reductions to sell cocoa from their personal accounts. Lever Brothers Ltd therefore brought a claim for rescission of the compensation package on grounds of mistake of fact.
Judgmentedit
Trialedit
The initial trial was held before Wright J and a City of London Special Jury.[1] The jury found that Bell and Snelling's illicit dealings breached the employment contract and that if the Lever Brothers had 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. Wright J therefore held the compensation agreements were void.
House of Lordsedit
On appeal, the House of Lords found that there was no mistake and the contract could not be rescinded nor was it void on mistake. Lord Atkin was writing for the majority. Dissent was written by Warrington and held that the mistaken assumption was fundamental to the contract, and thus the contract is voidable.
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 common 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 was not sufficiently close to the actual subject-matter of the agreement. The parties got exactly what they had bargained for.
The MacMillan article explains that the ratio was in part the result of media attention at the time, and socio-economic context of the trial.
Discussionsedit
In an article by JC Smith, "Contracts- mistake, frustration and implied terms", it is suggested that Bell v. Lever Brothers can be analysed into cases of res sua and res extincta.
Lever Brothers in substance was buying the right to 'extinguish' Bell and Snelling. Both parties were under the common mistake that Lever Brothers should pay the "Golden Parachutes" to Bell and Snelling. Lever Brothers did not know Bell and Snelling were speculating while Bell and Snelling did not know their speculation would entitle Lever Brothers to dismiss them without paying anything.
In the point of view of Lever Brothers, they are in substance buying a right they already had, that is extinguishing Bell and Snelling without paying a cent. This would be a case of res sua, since you cannot buy something you already have.
In the point of view of Bell and Snelling, it is the right of entitling the "Golden Parachutes" they are selling. This right does not exist since they speculated. The subject-matter they tried to sell, their right, no longer exist before they enter into the contract. This would be a case of res extincta, the disappearance of the subject-matter of the contract.
In either way, the contract would be void for mistake, though the House of Lords held that the mistake is not fundamental enough.
Significanceedit
The case put a high standard on the finding of common mistake. This was criticized in the later cases written by Lord Denning such as in Solle v Butcher where Denning LJ reduced the standard by enumerating an equitable remedy for a shared common mistake, which rendered the agreement voidable. Subsequently, in Great Peace Shipping Ltd v Tsavliris Salvage (International) Ltd (2002) the Court of Appeal purported to overturn Solle v Butcher 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,[2] Lord Denning remarked the following, in the context to the equivalent of an unfair prejudice action 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."
C MacMillan, 'How temptation led to mistake: an explanation of Bell v Lever Brothers, Ltd' (2003) 119 Law Quarterly Review 625-659
External linksedit
Full text at Bailii.org
October 30, 2023
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Bell v Lever Brothers Ltd 1931 UKHL 2 is an English contract law case decided by the House of Lords Within the field of mistake in English law it holds that common mistake does not lead to a void contract unless the mistake is fundamental to the identity of the contract Bell v Lever Brothers LtdUnilever House built in 1929 to house the company s headquartersCourtHouse of LordsDecided15 December 1931Citation s 1931 UKHL 2 1932 AC 161 1931 All ER 1Transcript s Full judgment from BailiiCourt membershipJudge s sittingViscount Hailsham Lord Blanesburgh Lord Warrington of Clyffe Lord Atkin and Lord ThankertonKeywordsCommon mistake Contents 1 Facts 2 Judgment 2 1 Trial 2 2 House of Lords 3 Discussions 4 Significance 5 See also 6 Notes 7 References 8 External linksFacts editLever Brothers Ltd which merged in 1930 to become Unilever was a company which traded in West Africa through a 99 owned subsidiary called the Niger Company formerly the Royal Niger Company The Niger trade was in trouble Lord Leverhulme the owner of Lever Bros hired D Arcy Cooper a Quaker and senior partner of his uncle s accountant firm Cooper Brothers to be the chairman and manage the crisis Cooper negotiated a loan from Barclays Bank which insisted that a professional management run the Niger subsidiary Cooper hired his friend Ernest Hyslop Bell a senior Barclays manager in 1923 as chairman of the subsidiary Mr Snelling a tax consultant that had successfully got Lever Bros a big tax refund in 1921 was appointed as vice chairman They did well and turned a profit The company was then merged with a former competitor African and Eastern Trade Corporation to form the United Africa Company in 1929 Bell had wanted to run the new United Africa Company because he was too old at 54 to have a job in the City and he had left his Barclays position At lunch in the Savoy Grill he agreed with Cooper that he would get a big compensation package 30 000 and retire A similar golden parachute of 20 000 was given to Mr Snelling However shortly after it was revealed that Bell and Snelling had been part of a regional cocoa cartel and used information on future price reductions to sell cocoa from their personal accounts Lever Brothers Ltd therefore brought a claim for rescission of the compensation package on grounds of mistake of fact Judgment editTrial edit The initial trial was held before Wright J and a City of London Special Jury 1 The jury found that Bell and Snelling s illicit dealings breached the employment contract and that if the Lever Brothers had 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 Wright J therefore held the compensation agreements were void House of Lords edit 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 Lord Atkin was writing for the majority Dissent was written by Warrington and held that the mistaken assumption was fundamental to the contract and thus the contract is voidable 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 common 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 was not sufficiently close to the actual subject matter of the agreement The parties got exactly what they had bargained for The MacMillan article explains that the ratio was in part the result of media attention at the time and socio economic context of the trial Discussions editIn an article by JC Smith Contracts mistake frustration and implied terms it is suggested that Bell v Lever Brothers can be analysed into cases of res sua and res extincta Lever Brothers in substance was buying the right to extinguish Bell and Snelling Both parties were under the common mistake that Lever Brothers should pay the Golden Parachutes to Bell and Snelling Lever Brothers did not know Bell and Snelling were speculating while Bell and Snelling did not know their speculation would entitle Lever Brothers to dismiss them without paying anything In the point of view of Lever Brothers they are in substance buying a right they already had that is extinguishing Bell and Snelling without paying a cent This would be a case of res sua since you cannot buy something you already have In the point of view of Bell and Snelling it is the right of entitling the Golden Parachutes they are selling This right does not exist since they speculated The subject matter they tried to sell their right no longer exist before they enter into the contract This would be a case of res extincta the disappearance of the subject matter of the contract In either way the contract would be void for mistake though the House of Lords held that the mistake is not fundamental enough Significance editThe case put a high standard on the finding of common mistake This was criticized in the later cases written by Lord Denning such as in Solle v Butcher where Denning LJ reduced the standard by enumerating an equitable remedy for a shared common mistake which rendered the agreement voidable Subsequently in Great Peace Shipping Ltd v Tsavliris Salvage International Ltd 2002 the Court of Appeal purported to overturn Solle v Butcher 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 2 Lord Denning remarked the following in the context to the equivalent of an unfair prejudice action 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 See also editUK competition law Cooper v Phibbs 1867 UKHL 1 1867 LR 2 HL 149Notes edit United Kingdom House of Lords Lever Bros Ltd v Bell 1931 UKHL 2 delivered 15 December 1931 accessed 3 May 2023 1959 AC 324References editC MacMillan How temptation led to mistake an explanation of Bell v Lever Brothers Ltd 2003 119 Law Quarterly Review 625 659External links editFull text at Bailii org Retrieved from https en wikipedia org w index php title Bell v Lever Brothers Ltd amp oldid 1152912943, wikipedia, wiki, book, books, library,
