Respondent was a partner as regards 425 bags of gum Arabic with
a certain H. In 1915 H. was deported from the Sudan and the winding
up of the firm was entrusted to the appellant. The appellant, mistakingly
thinking that the share capital of the respondent was intact,. agreed to
buy the respondent's share in the firm for £E319.250 m/ms and invoiced
to him as for a cash payment 31 bales of cotton material which were
warehoused with the National Bank. Very shortly after that the appellant
discovered that about half of the respondent's capital had already been
lost and therefore immediately cancelled his order to the bank for delivery
of the material. The appellant resisted the respondent's claim for specific
performance.

Held: (i) The appellant acted under a genuine mistake of fact in
thinking that the respondent's capital was intact, and since he discovered
the mistake immediately and repudiated the contract the same day, a
hardship amounting to injustice would result from holding him to his

                 agreement.                               .

(ii) Since both respondent and appellant' were under the impression
that respondent's capital was safe, the agreement was entered into upon
the faith of it state of facts whichxlid riot exist, and since the parties could
be returned to their previous positions the agreement would not be
specifically performed.

Fleming J. Dissenting.

Tamplin v. James (1880) 15 Ch. D. 215 approved and applied.
Emmerson's case (1867.) 36 L. J. Ch. 177 followed.

Appeal

The facts of this case as they appear from the judgment of
Wasey Sterry, C.J. are as follows:

The respondent Ghali Mikhail had a partnership transaction in
regard to 425 bags of gum with the firm of Hehlen Ohm & Co. In
March 1915 the respondent sued his partner claiming £700 in respect
of certain, damages for alleged breach of contract, for share of
profits, and for return of his capital of £343.250 mlms. In this
action he failed in respect of the damages OI) the merits; in respect
of the -claim for profits and return of capital on the ground that the
action was premature, only a small part of the gum having then been
sold. The - judge added that it was probable that the -partnership
deal might end in a loss: a: result which Mr. Hehlen had alleged would
happen.

In April 1915 Mr. Hehlen was deported from the country as
an enemy' alien and the winding up of his firm's affairs was entrusted
to Mr. Licos the. appellant in this case. Of the 425 bags of gum
60 had been disposed of by the date of the judgement in the case of Mikhail v. Hehlen & Co., 246 more were disposed of on the 5th and
14th of May, and ,36 more on June 8. On June 14 there
remained 78 bags unsold and it was evident to anyone who looked
into the accounts' on that day that not only would there be no profit,
but a loss of about half the respondent's capital unless the 78 bags of
gum sold for about twice the price that any of the rest of the gum

        had sold for.                         

It appears that the respondent was very anxious to clear up the
.business and go and 'there is no doubt that he had pressed the
appellant several times to pay him out and get rid of him. The
appellant seems to have invoked the assistance of a certain Ibrahim
Amer as a mediator and on June 14 he signed an agreement with
the respondent to purchase the whole interest of the respondent in
the partnership for the sum of £319.250 m/ms. What the respondent
purported to sell was "all my rights etc. etc. including the capital
and any eventual profits." The appellant did not pay actual cash, but
he invoiced to him as for a, cash payment 31 bales of cotton stuff
which was in the warehouse of the National Bank and the respondent
departed immediately to take over the goods.

Down to that moment the appellant was acting under the impres-
sion that the respondent's capital was practically intact and that he
thought he might find a few pounds profit over and beyond.' Directly
after the respondent left his office it seems to have struck him that
he had acted most foolishly and recklessly and he thereupon looked
at the books of accounts of the sales. He discovered that unless an
impossible price was obtained for the 78 bags yet unsold probably
about half the respondent's capital was lost, and that he had made a
bargain on which he must lose. Thereupon he immediately cancelled
his order to the bank to deliver the goods and repudiated the ,whole
transaction. This all took place on the same day.

The respondent thereupon sued the appellant for specific per-
formance of a contract to deliver goods and Judge Davidson held that
the appellant should either deliver to respondent 31 bales of Damur
or pay him the sum of £319.250 m/ms.

Advocate: Mr. Frangoudis ... for appellant.

Mr. Frangoudis: ( 1 ) there was a failure or inadequacy . of consideration;

(2)there was a mistake on the part of the appellant;
(3) the mistake was induced by the fraudulent misrepresentation of the respondent;

(4) alternatively the mistake was induced by a misrepresentation of the respondent which did not amount to fraud.

March 2, 1916. Wasey . Sterry, C.J.: After stating the facts
and' summary. of argument given above the Honourable Chief Justice
proceeded.

As regards the first point we are agreed that there is no failure
of consideration and that inadequacy in the sense that the considera-
tion for every bad bargain may be said to be inadequate is no ground
for avoiding the contract. Inadequacy in that sense can only be used
as evidence corroborative of other evidence Of fraud,

Of fraud on the part of the respondent ~e see -no. evidence what-
ever; certainly none in the evidence of Mr. Uziel whom Mr. Frangoddis
desired to call to show some fraudulent concealment.

We come then to points 2 and 4. Now if the appellant's mistake
was due in whole or in part to a misrepresentation by the respondent
not amounting to fraud We have no doubt· that the appellant would
be entitled to succeed, but we do not consider thatthe appellant has
been able to prove any direct misrepresentation at all on the part of
the respondent, and we know, as the appellant admits, that he had
all the means of knowledge in his own hands, and from the letter of
Ibrahim Amer produced by the respondent we consider we are justified
in assuming that the appellant knew that the price he could offer for
the respondent's rights depended on the accounts.

The final question then remains: is the appellant's mistake in
this case sufficient to avoid the contract?

Our view of what happened is this: l:he respondent was very
anxious to be quit of the whole business and was continually· pressing
the appellant to pay him off (and get rid of him. Ibrahim Amer was
called in to see if he could make terms. Finally the appellant thinking
that at all events the capital of the respondent was safe said he would
give the respondent his capital and put an end to it. We think it
quite possible, that the respondent, even if he had seen and studied
the accounts, still remained of opinion that somehow or another he
was entitled to much more than it now appears he was-this is a
common delusion among litigants-and that confident expectation
honestly entertained might have been sufficient to make Mr. Licos
assume that the capital at all events was safe. We lay stress on this
point because we are satisfied that the purchase price was fixed by

. the figure at which the respondent's capital in the partnership then stood and we think it also significant that: the agreement' uses the
words "including the capital and any eventual profits."

We are therefore of opinion that Mr. Licos was under the
mistaken impression that whatever else happened the capital was
intact and if he was lucky he might make a few pounds, Now if he
had waited for a long time or until the conclusion of the whole of
the gum sales before repudiating the contract we. should agree with
Judge Davidson that he was buying a speculative property and' he.
could not, if it turned out unremunerative, then claim to .avoid the
contract; but when we are satisfied that he acted under a genuine
mistake of fact which he discovered immediately after he had made
the agreement, and' repudiated it the same day, we think the case
comes within the words of Lord Justice James in Tamplin, v. James
(180(}). 15 Ch. D. 215 "The cases where a defendant has escaped
on the ground of a mistake not contributed by the plairitiff have been
cases where a hardship amounting to injustice would have been inflicted
upon him by holding him to his bargain and it. was unreasonable to
hold him to it."

'Further, we are inclined to think that it is not going too far to
say that assuming the respondent to have been under the impression
that his capital was safe" and his conduct seems to show this, the case
would then come within 'the rule laid down in Addison on Contracts,
referring to Emmerson's case (1867) 36 J. Ch. 177, "Where a contract
has been entered into upon the faith of a state of things which does
not exist . . . the contract. will be rescinded provided the court c!pl
replace the parties in their original condition, or specific performance

        will not be enforced."                                      

March 2, 1916. H. Peacock J.: I agree. I wish to add that'
in view of the facts it is obvious that the transactions of the partner-
ship of Hehlen and Ghali Mikhail must end in a loss. The fact was
so stated by l-!~(en in . the' court below and no. business men looking
into the acco iUs could come to any other conclusion. . .

March~2, 1916. M. Fleming J.: I agree with that part of the
judgemept" proposed by the Chief Justice which deals with' the' pleas
of fr~ud, misrepresentation, and inadequacy of consideration. Mis-
representation has not been proved, there is no evidence of fraud;
except that the consideration turned out to be inadequate, and
inadequacy of. consideration in the absence of other evidence' of fraud is • useless, plear,With the part of the proposed judgement which deals with .the
plea of mistake I have, however, great difficulty in agreeing. I have.
been unable to find in such reports of English cases as are available
to me any instance in which a party who had all the means of knowl--
edge available to the other party, and. who was led into an erroneous
belief as to the value of the consideration, not by the representations
of the other party, but by his own negligence, has been relieved on
the ground of mistake alone of the obligation to perform a contract
which is capable of performance. Possibly such instances have
occurred and in the passage, which the Chief Justice has quoted from-
a judgement of Lord Justice James in which he speaks of cases where
a "hardship amounting to injustice" would be inflicted it may be that
his Lordship would have included such a case as the present within
the scope of that ambiguous expression. I should, 'however, have been
disposed to think that he was referring to cases of a different type.
If such a plea is admissible at all it should in my opinion be accom-
panied by the strongest evidence of the injustice, 'and the error should
be so gross and palpable that it would offend one's conscience to
allow the other party to profit by it. I should very much hesitate to
say that the error committed in this case attained such dimensions.
The error made was in supposing that a certain business transaction
might result in a profit. It has been assumed in argument in both
courts that the most cursory glance at the accounts would show that
a profit was out of the question. I remark by the way that the
obviousness of this conclusion should have been made more clear to
the court, but what impresses me most about the plea is that the
parties to this contract who are both experienced business men had
ample means of studying the accounts, that they were actually in the
custody of the appellant who made the mistake, and that the respond-
ent stated on oath that he did not know there would be a loss and
that statement passed unchallenged by cross-examination. It may be
that a business man who had taken the trouble to study the accounts
would have formed the opinion that there would in all probability be
a loss of part of the capital, but' the appellant did not take the
trouble and so he got the worst of the bargain.I am not certain whether the appellant intended to include

.amongst his numerous alternative pleas the plea that it was an implied
condition of the contract that the whole capital exist~d. ' The expres-
sion "the capital and any eventual profits" lends perhaps SOIJlC