Chapter 8: Doctrine of Mistake

Question 1

What is the Doctrine of Mistake?

Answer 1

1. If an operative mistake can be proven, the contract will be declared as Void ab initio (void)
2. Contract will be non-existent as there was no consensus ad idem (meeting of minds)

Question 2

What are the 2 types of mistake?

Answer 2

Bilateral mistake

Unilateral mistake

Question 3

What is a bilateral mistake?

Answer 3

Where both parties are mistaken

• there are 2 types of bilateral mistake

Question 4

What are the 2 types of bilateral mistake? Explain.

Answer 4

Cross purposes

• Both parties are mistaken. Mistaken on different points

Common mistake (mutal mistake)

• Both parties are mistaken. On the same point/issue
• 4 situations of mistake

Question 5

What is a unilateral mistake?

Answer 5

Only one party is mistaken

Question 6

What are the 6 factors for cross purposes

Answer 6

1. Both parties are mistaken
2. Mistaken on different points/issues
3. Sufficiently fundamental
4. Offer & acceptance do not correspond (no consensus ad idem)
5. The mistake negates the consent to contract
6. Objectively interpreted - not what the parties had intended

Question 7

What are the 2 cases for cross purposes

Answer 7

Raffles v Wichelhaus (1864)

Scriven Brothers v Hindley (1913)

Question 8

Raffles v Wichelhaus (1864)

cross purposes

Answer 8

Facts

1. Wichelhaus wanted to buy cotton from Raffles from Bombay on a ship called ‘Peerless’
2. Peerless arrived to Wichelhaus in December
3. Wichelhaus expected another ship also called ‘the Peerless’ in October
4. When the cotton arrived, Winchelhaus refused to pay for the bale
5. Claimed that ‘the Peerless’ was supposed to deliver the cotton, but left Bombay 2 months earlier in October
6. Raffles (claimant) sued for breach of contract

Held

1. No contract
2. Parties had missed each other on very material/fundamental terms

• No meeting of minds
• No contract actually came to agreement in the first place (thus void)

Takeaway

• Mutual misunderstandings are void/invalid contracts

Question 9

Scriven Brothers v Hindley (1913)

Answer 9

Facts

1. Scriven Bros (claimant) instructed auctioneer to sell large bales of tow and hemp on behalf of them
2. Bales looked similar to samples that were on display for potential bidders
3. Hindley (defendant), mistaken that they were bidding for 2 lots of hemp
4. When D found out it was tow, he refused to pay
5. D sued

Held

1. No contract to begin with (void/invalid)
2. They were agreeing/accepting something else all together (no meeting of minds)

Question 10

What are the 4 factors for common mistake (mutual mistake)

Answer 10

1. Both parties made mistake
2. Both parties made the same mistake
3. Must relate to something that both parties must necessarily have accepted in the minds as an essential element of the subject matter
4. Both parties make the same mistake about a critical element of agreement (no consensus ad idem)

Question 11

What are the 4 situations of common mistake (mutual mistake) under bilateral mistake?

Answer 11

1. Res Extincta
2. Res Sua
3. Possibility of Performance
4. Mistake as to Quality of SM

Question 12

What is Res Extincta?

Answer 12

Parties mistake the existence of subject matter before the contract was made (non-existent)

Outcome

• There is an initial impossibility - impossible to have contract without the goods
• Contract will be void on grounds of mistake

Note - If the subject matter ceased to exist after contract was formed (frustration)

Question 13

What are the 2 scenario cases for Res Extincta?

Answer 13

Where subject matter ceased to exist before contract was entered into

• Couturier v Hastie (1856) HL

Where subject matter never existed at all and both parties were unaware

• McRae v Commonwealth Disposal Commission (1951) HC of Australia