Contract Law: Mistake Flashcards
Introduction
Mistake is a vitiating factor, it will invalidate or undermine a contract
Mistake can lead to void ab inito meaning it was never in existence in the first place
Void or Voidable
Void: Contract is deemed to not have been created
Voidable: Contract was created but can be rescinded
- Remedy: Set the contract aside; either entire agreement or particular terms
Types of mistake
- Common mistake (to a. the subject matter or b to the essential quality of the subject matter
- Mutual mistake (communication mistake)
- Unilateral mistake (communication mistake)
Communication mistake
- Both parties make a mistake which goes to the root of the contract
- The outcome is that the performance is impossible or very different to what the parties intended
res extincta: mistake as to the existence of the subject matter
Common Mistake (part a)
Existence of subject matter
- Goes to the root of the contract
- Subject matter no longer exists
Common Mistake (part a) Case
Couturier v Hastie: Subject matter of the contract did not exist at agreement, no consideration provided, contract was void (led to the adoption of the Sales of Goods Act s.6)
Common mistake (part b)
Only void where the mistake is fundamental or renders the contract essentially different to what it is believed to be
Common Mistake (part b) case
Bell v Lever Bros 1932: The mistake was not sufficiently fundamental in nature to render the contract void
Common Mistake: Requirements
Established in Great Peace Shipping Ltd v Tsavliris 2002:
- Must be a common assumption as to the state of affairs
- State of affairs must exist to make performance possible
- Must be no warranty by either party that such state exists
- Non-existence must not be attributable to either party
- Non-existence renders performance impossible
Mutual Mistake
- Both parties are deemed to never have reached agreement )no consensus ad idem)
- Void if central to the contract
- Objective test applied
Mutual Mistake cases
- Raffles v Wichellhaus [1864]: no consensus idem, contract void
- Smith v Hughes: sued for misrepresentation and mistake, no misrepresentation (silence) no mistake as no error or fundamental term
Unliteral mistake
- One party makes mistake, other takes advantage
- only when one party has superior knowledge and uses this unfairly
- Mistake must be sufficiently important
Two types of Unilateral Mistake
- Mistake as to the term of contract
- Mistake as to identity
Can distinguish between f2f and distanced negotiations
Mistake as to term
Sets principal that if an obvious mistake is made, one may not ‘snap up’ the offer
Mistake as to term case
Hartog v Collin & Shields 1939: Void for mistake, C must have known the offer was a mistake, no contract existed, buyer took advantage, mistake negates consent
Mistake as to identity
- Most common mistake
- Must relate to identity to the person whom they’re dealing with
- Usually involved fraud
- Overlap with misrepresentation
Ingram v Little 1961: Identity of contracting party of utmost importance, checked identity, identity was fraudulent, claim successful
F2F cases
Lewis v Avery 1972: Mere mistaken belief as to the credibility of the other party is not sufficient
Negotiations at a distance (incl case)
Seller intends to deal with the person named on the form
Cundy v Lindsay 1878: No agreement, no ownership of the goods. Forced to return goods
Negotiations involving third parties
- Contract will be void if claimant is mistake as to the identity of the other party
- Contract will not be void if the claimant intended to contract with the person who made the offer, mistake will be on the other parties creditworthiness
Third Parties Case
Shogun Finance Ltd v Hudson: Not formed F2F, finance co could avoid the contract due to mistake, SF dealing with fake Mr Patel, not rogue in question
