JOHN LOBB S.A.S v JOHN LOBB LIMITED

A contract is not void for common mistake where its terms expressly or impliedly allocate to one party the risk that the shared assumption may be wrong. An allocation of risk need not specify the consequences of the mistake in express terms.

The fundamental-mistake requirement may be stated as impossibility of performance or as the mistake rendering the contractual subject matter essentially and radically different from what the parties believed it to be. The formulations are substantially equivalent and impose a stringent test. The court must analyse the contract and the rights and obligations it creates.

John Lobb S.A.S appealed against Deputy Master Marsh’s refusal to grant summary judgment or strike out John Lobb Limited’s claim. The claim alleged that a 2008 agreement regulating the parties’ future relationship was void for common mistake concerning ownership of the John Lobb trade marks.

The Deputy Master held that the claim had a real prospect of success. He considered that the agreement did not allocate the relevant risk and that the fundamental-mistake test might extend beyond impossibility of performance. The appeal concerned the proper application of the common-mistake doctrine and the suitability of the claims for summary disposal.

1. Appeal allowed in relation to summary judgment. The respondent had no real prospect of establishing that the 2008 Agreement was void for common mistake.
2. The relevant question under the second element of the doctrine was whether the contract allocated responsibility for, or the risk of, the assumed state of affairs proving false. This was not confined to whether a technical warranty had been given. The combined effect of Recital G and clause 1.3 was to allocate that risk to the respondent. Recital G unequivocally identified the appellant as legal and beneficial owner of the marks, while clause 1.3 required the respondent expressly to acknowledge those ownership rights as the foundation of the licensing scheme.
3. The fourth element could be expressed alternatively as requiring impossibility of performance or an essential and radical difference between the actual subject matter and the subject matter believed to exist. The two formulations were not materially different and both imposed a stringent test. A mere comparison between the assumed and actual states of affairs was insufficient.
4. The 2008 Agreement created a suite of rights and obligations regulating the parties’ future business relationship, including use of the marks, financial payments, assistance, maintenance and protection of the marks, and pre-emption rights. The mistake as to beneficial ownership did not make performance impossible or render that subject matter essentially and radically different. The agreement remained capable of operation by reference to the true state of affairs.
5. The court should decide a short point of construction on a summary judgment application where it has the necessary evidence and the parties have had a proper opportunity to address the issue. No compelling reason for a trial existed.
6. The pleaded claim was adequately particularised and disclosed reasonable grounds for bringing the claim. The order striking out the claim under CPR 3.4(2)(a) was therefore not disturbed, although summary judgment was entered for the appellant and the respondent’s claims were dismissed.

• Chancery Appeals (ChD): Appeal from Deputy Master Marsh’s order following [2021] EWHC 1226 (Ch) . Summary judgment granted for the appellant and the respondent’s claims dismissed.