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Bell v Lever Bros Ltd [1932] AC 161

Contract – Mistake – Common mistake – Void – Concealment – Misconduct – Redundancy – Breach of Duty – Compensation

Facts

Mr Bell was the managing director for five years of a company that was owned by Lever Bros Ltd. Mr Bell had traded for personal profit during his employment, which was contrary to his contract with the company. Without knowledge of this, Lever Bros Ltd made an offer of redundancy to Mr Bell, terminating his contract and offering a £30,000 payment as compensation.

Issues

The main issue in this case was whether the redundancy contract that was created and accepted by Mr Bell, could be void by common mistake, due to later finding out about his personal trading. Lever Bros Ltd argued that this concealment and misconduct was a breach of his duty that was detailed in his employment contract.

Held

The court held that the contract was not void, as the mistake was not an ‘essential and integral’ part of the contract. The personal trading that had happened during the employment was not related to the subject matter of the contract and was said to be minor compared to the profits Mr Bell had made for Lever Bros Ltd. Only a mistake to the identity of the parties or of subject matter to the contract, as well as an item’s quality, would be able to successfully negate consent and therefore void a contract, as if it had never existed. The mistake must be essential to the identity of the contract.


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