Mistake

Question 1

Operative mistake

Answer 1

a mistake which is recognised in the law of contract as preventing a contract from taking legal effect - contract will be void

Question 2

3 categories of mistake

Answer 2

1. common mistake
   - occurs when both parties to an agreement are suffering from the same misapprehension
2. mutual mistake
   - occurs where both parties are mistaken but they are mistaken about different things
3. unilateral mistake
   - occurs where only one party is mistaken and the other party knows, or is deemed to know of the mistake

Question 2

What are the 3 circumstances where common mistake will not operate?

Answer 2

1. mistake is not fundamental
2. one party is at fault
3. contract makes provisions for the issue

Question 3

How does the court judge the conduct of the parties to assess if contract is valid in a mutual mistake?

Answer 3

objectively; if a reasonable person, observing negotiation would have concluded one party’s conduct that was accepting the offer, then contract is valid despite that party’s mistake.

Question 4

What are the 3 main potential types of unilateral mistake?

Answer 4

1. mistake by offeror in expressing their intention
2. mistake as to nature of document signed (e.g. illiteracy etc)
3. mistake as to person’s identity

Question 5

What is the legal status of the contract where there is a unilateral mistake as to identity in a face to face setting?

Answer 5

The contract will be void if seller can persuade court that identity of buyer and not their attributes was of vital importance to the contract.

Question 6

What is the difference between void under mistake and voidable under misrepresentation when discussing mistakes as to person’s identity?

Answer 6

voidable under misrepresentation= title still passes, cannot take away good from third party who dealt in good faith

void under mistake= third party must return good to seller because the fraudster never had title to sell the goods to third party, so title never passed