The principle in Centrovincial Estates v Merchant Investors (1983)

Question

What was the main point in the dispute in Centrovincial Estates v Merchant Investors (1983)?

Answer

In this case, the claimant had agreed to let specific premises to the defendants. A letter was sent to the defendants specifying that the current market rental value of the property in question was £65,000. This was then agreed to constitute an offer which the defendants accepted. The offer was in fact made by the claimant’s solicitors and was constructed upon a mistake. The real price that they were supposed to specify in the offer was actually £126,000. The claimants were contacted and the mistake was pointed out. The defendants, nevertheless, stated that the contract had already been concluded and that there was no way for them to have known that the price offered had been a mistake and not the actual price.

The court held that the contract was not rendered void by the mistake, as an objective approach was taken. However, the decision is controversial due to offerees being entitled to create legal rights for themselves by merely accepting an offer, when they have in no way relied upon the offer and also being informed that it was a mistake, not reflecting the intention of the offeror.

The reasoning behind this controversial decision on this occasion is that, if the law were to take into consideration whether there was reliance on promises, then this would result in depriving contractual agreements of stability until they are actually relied upon. This would undermine the essential predictability, contractual stability and certainty that are advanced by the objective approach in its existing state. The objective test here would be, what would have been the intentions of a reasonable person and in this case, mistake was not interpreted as mistake by the offerees.

References

Centrovincial Estates PLC v Merchant Investors Assurance Company Ltd [1983] Com LR 158