Mistake Flashcards
What is a vitiating factor?
One that affects validity of a contract
What is the legal effect of a vitiating factor?
-Void for mistake: contract never existed
-Voidable for misrepresentation, duress. Contract exists but is ‘damaged’ thus, set aside
What are the three types of mistake?
1) communication
2) identity
3) common mistake of fundamental facts
Explain communication mistakes
-One of the parties makes a mistake about the terms of the contract
-The parties are not agreeing about the same thing therefore, there is no consensus ad idem
-Smith v Hughes (1871) LR 6 QB 597
Explain mistake of identity
-Rogue/con-person misrepresents themselves as someone else
Explain the common mistake of fundamental facts
-There is consensus ad idem but both parties are mistaken about the same thing
-Great Peace v Tsarvaliris Salvage [2002] EWCA Civ 1407.
Mistake law applies the objective test. What is the objective test?
-Would the reasonable observer, based on external appearances, think that the parties reached an agreement?
Explain the term ‘snapping up’
-The court will not allow one party to take advantage of the other’s mistake to ‘snap up’ a bargain where the other party is aware of the mistake being made
-Hartog v Colin and Shields [1939] 3 All ER 566
-Chwee Kin Keong v Digilandmall (2004)
Is there a valid contract if a seller causes the buyer to make a mistake?
-No, this is an exception to the objective test
-Scriven Brothers & Co v Hindley & Co [1913] 3 KB 564
What is another exception for the objective test?
-Latent ambiguity: vague terms that will lead to a misunderstanding can be considered latent ambiguity
How can a contract be void for mistaken identity?
-Only if the innocent seller can show that they only intended to deal with the person the rogue was intending to be
-Must be shown that the identity of the rogue is to the upmost importance to the seller
What is the presumption in face to face contracts, and how does this affect the validity of the contract?
-It is presumed that the innocent seller intended to deal with the person in front of them thus, there is consensus ad idem between the parties and the contract is not void
-Phillips v Brooks Ltd [1919] 2 KB 243
-Lewis v Avery [1972] 1 QB 198
What is the presumption in remote contracts, and how does this affect the validity of the contract?
-There is a connection in the sellers mind with the rogues name only and the seller is not aware of the existence of anyone else thus, the seller only intended to contract with this person and there is no consensus ad idem and the contract is void
-Cundy v Lindsay (1878) 3 App Cas 459
-Shogun Finance v Hudson [2004] 1 AC 919
What is the five point criteria identified by Lord Phillips MR to be considered before determining if a contract is void under common fundamental mistake?
1) There must be a common assumption as to the existence of state affairs
2) There must be no warranty by either party that the state of affairs exists
3) The non- existence of state affairs must not be attributable to the fault of one party
4) The non- existence of state affairs must render performance of the contract impossible
5) Consideration: What the mistake must relate to
Explain the common assumption of the existence of state affairs
-When the parties have reached an objective agreement, but both are mistaken about the same fundamental fact of the contract
Explain neither party must warranty that the state of affairs exists
-When one party has assumed the risk that the assumed state of affairs is wrong and therefore they provide a guarantee to the other party which gives them grounds for a voidable contract
-McRae v Commonwealth Disposals Commission (1951) 84 CLR 377
Explain the non- existence of the state of affairs must not be attributable to the fault of one party
-One party cannot be responsible for the mistake in the contract
Explain the non- existence of the state of affairs must render performance of the contract impossible
-The contract must become impossible to complete
-Great Peace the contract caused economic duress but was not impossible
Explain consideration: What the mistake must relate to (three aspects)
1) existence- if the goods have perished e.g. oranges the contract will be void
2) ownership- not common but if someone has entered a contract to buy their own property
3) quality- e.g. great peace the mistake related to quality because ship was not located in the area both parties believed it to be
