Amalgamated Investment and Property Ltd v John Walker Ltd [1977]

Court of Appeal

Facts: Claimant (C) bought from Defendant (D) for £1.7m a warehouse which had been purpose built as a bonded warehouse and bottling factory for D.  D advertised it on the basis of it being redeveloped.  C asked D whether the building had been listed to which D honestly and accurately replied that it had not.  The day after contract formation, the building was listed, dropping its value to £200,000.  C claimed either mistake or frustration to try and get out of the contract.

Issue for the Court: What’s the difference between mistake and frustration?

Held: The Court of Appeal rejected the Defendant's claim for rescission and granted an order for specific performance of the contract. The court found there was no mutual mistake since, at the time of signing, the building was not listed and was suitable for redevelopment. The listing of the building occurred after the contract was signed, thus not affecting the parties' understanding at the time of the contract's formation. The court held that the contract did not stipulate that the building must not be listed for it to be effective. Therefore, the risk of the building being listed was assumed by the Defendant. The subsequent listing was considered a risk inherent in purchasing property and did not render the contract impossible to perform

Buckley LJ

·      For mistake, must show that mistake existed at contract formation.

o   Here, mistake was only to their expectation surrounding the contract.

o   Not to some term or the circumstance surrounding contract formation.

·      Therefore, it’s frustration that comes into play.

o   Because events have changed after contract formation in a manner the parties say they cannot have predicted, and which fundamentally changes the nature of the performance contracted for

§  However, the risk of a building being listed is one that inheres in the ownership of buildings.

·      So, this is therefore not a frustrating event.