The case title Solle v Butcher [1949] 2 All ER 1107 may evoke memories of languid afternoons at the College of Law and stimulating lectures on the law of contract.The case is one of the leading authorities for the proposition that, even though it is nigh impossible to avoid a contract at common law on the ground of mistake, equity will grant relief when it is fair and just to do so.

These were the facts.

An agreement had been reached for the letting of a flat.

It was assumed that the rent was not controlled under the rent restriction legislation then in force.In the event, the restrictions did apply and the permitted rent chargeable was less than the contractual rent.

When the mistake was discovered, the tenant claimed repayment of the rent he had overpaid.

The landlord counterclaimed seeking rescission on the basis of mutual mistake.

The agreement was set aside on terms.The Denning touchIn his judgment, Denning LJ (as he then was) made three points about the equitable jurisdiction in relation to mistake:-- Equity will relieve a party from the consequences of his mistake so long as it can do so without injustice to third parties.-- The court has power to set aside a contract whenever it is of the opinion that it would be unconscientious for the other party to avail himself of the legal advantage he has obtained.-- If a party, knowing that the other party is mistaken either about the identity of the first party or the terms of an offer, lets him remain under the delusion rather than pointing out the mistake, equity will set the contract aside.However, a recent decision of Rimer J casts doubt on the substance of the second point and on whether there is in fact any equitable jurisdiction to set aside when the mistake gives rise to circumstances which appear, without more, to be merely unconscionable.In Clarion Ltd and others v National Provident Association [2000] 2 All ER 265 Clarion was in the business of investment management and NPI was a mutual life office.

An agreement between them permitted Clarion's customers to switch investments between funds.

The procedure initially agreed provided that a request for a switch should be made on Day 1 of any period.

It would be received by NPI on the morning of Day 2 and be put into effect on Day 3 at the market price prevailing at midday on Day 2.

The system was called 'forward pricing' and neither Clarion nor the customer would know the prevailing price until after the written request had been ma de.

Your commercial partner will be able to explain why the system was more profitable for NPI than for Clarion.Subsequently, the parties agreed that an oral request could be made by fax before 5pm on Day 1 and be effected on Day 2.

But because of the system for determining prices the switch would be made at the market price at midday on Day 1.

Thus Clarion would know the price before deciding whether to send the faxed request.

This represented a change to 'historic pricing' and was vastly more profitable to Clarion that the previous system, at the expense of NPI.

Again, your commercial partner will be able to explain why.

When NPI realised what was happening, there was much wailing and gnashing of teeth.

They believed the supplemental agreement did not extend beyond a procedure for faxing requests and had not appreciated the agreed faxing system would be used by Clarion to boost their profits.

They sought relief in equity for the mistake on the basis that the way in which the new system was being used by Clarion was unfair.Rimer J was unable to find any authority for the existence of any equitable jurisdiction for relief from a bad bargain where there had been no mistake about the subject matter of the contract.

He disagreed with Denning LJ that Torrance v Bolton (1872) LR 8 Ch App 118 provided that authority.

It follows that a cautious approach is required when advising clients who have entered into agreements which they now reckon to be unfair.

Nevertheless, it may pay to keep watching this space, since to quote the latest edition of Chitty at 5-094: 'It seems that the relationship between law and equity in this area has not yet been finally settled.'