Mistake Flashcards
A contract which is void (in contrast to voidable) is….
(a)
…of no legal effect from the outset.
(b)
…terminable by either party without notice
(c)
…able to lead to the transfer of property unless and until voided.
(d)
…liable to be set aside by the court
(a) …of no legal effect from the outset.
Which of the following is not one of the three categories of mistake that can amount to an operative mistake?
(a)
Fundamental mistake.
(b)
Mutual mistake.
(c)
Common mistake.
(d)
Unilateral mistake.
(a) Fundamental mistake
What is the legal status of the contract where there is a unilateral mistake as to identity in a face to face setting?
(a)
The contract will be void if the seller can persuade the court that the identity of the buyer and not their attributes was of vital importance to the contract.
(b)
The contract will be voidable as the reasonable person would have made the same mistake.
(c)
The contract will be void as the seller’s mistake will affect the nature and value of the contract.
(d) The contract will be void if the seller can show that they asked the buyer to verify their identify before the sale.
(a) The contract will be void if the seller can persuade the court that the identity of the buyer and not their attributes was of vital importance to the contract.
The general rule is that where there is a unilateral mistake as to identity in a face to face setting, the contract formed is voidable as it is presumed that the seller intended to contract with the person in front of them identified by sight and hearing and that is what happened. However, the contract will be void if the seller can persuade the court that the identity of the buyer was fundamental to the contract.
In what type of transaction is a finding of unilateral mistake of identity more likely?
(a)
A transaction conducted face to face
(b)
A distance selling transaction
(b) A distance selling transaction
In which of the following situations will title to the goods pass to an innocent third party?
(a)
In a distance selling transaction where there is a unilateral mistake as to the identity of the buyer.
(b)
In a face-to-face transaction where there is a fraudulent misrepresentation as to the attributes of the buyer.
(b) In a face-to-face transaction where there is a fraudulent misrepresentation as to the attributes of the buyer.
What is the definition of an operative mistake and what is the legal effect of it?
Operative mistake = mistake which is recognised in law of contact as preventing from taking legal effect - contract will be void from outset ie it has no legal effect
Law of mistake: exception to general rule of contract that parties are bound by terms of agreement and must rely on contract for protection from effect of facts unknown to them
What are the three categories of mistake?
- Common mistake: occurs where both parties to agreement are suffering from same misapprehension
- Mutual mistake: occurs where both parties are mistaken but they are mistaken about different things - they have negotiated at cross-purposes
- Unilateral mistake: occurs where only one party is mistaken and other party knows, or is deemed to know, of mistake
When does a common mistake occur?
- Occurs where both parties to agreement are suffering from same misapprehension
- Necessary to consider underlying common mistake is sufficiently fundamental to affect validity of contract
- In absence of contractual misdescription, general proposition is that mistake about quality of goods does not void contract - case even if mistake as to quality affect utility of goods to buyer, or alternatively, affects value of goods in question
- Has been suggested that there’s limited category of cases where mistake is so severe that contract will be void for mistake as to quality - tests to be applied unclear
- Could be question of:
1. Whether mistake is such that subject matter is essentially different from that intended, or
2. Whether mistake renders assured performance impossible or
3. Whether subject matter is rendered radically different
Where will common mistake not operate?
- Mistake is not sufficiently fundamental
- One party is at fault
- Contract makes provision for issue
When does mutual mistake arise?
Occurs where both parties are mistaken but they are mistaken about different things - have negotiated at cross-purposes
Court will employ objective test and decide what reasonable TP would believe agreement to be, based on words and conduct of parties themselves - may be decided that agreement was that which A understood it to be or that which B understood it to be, or it may decide that no meaning can be attributed to agreement at all
Result is that if, from available evidence, reasonable person would infer existence of contract in given sense, court will hold that contract in sense that it is binding upon parties, notwithstanding material mistake
When will unilateral mistake arise?
Occurs where only one party mistaken and other party knows, or is deemed to know of mistake
Where occurs, acceptance does not correspond with offer and there is consequently no real agreement reached
What are the categories of unilateral mistake?
- Unilateral mistake as to expression of intention: Where offeror makes material mistake in expressing intention, and other party knows, or is deemed to know of error, mistake is likely to lead to contract being void
- Unilateral mistake as to nature of doc signed: general rule is that person is bound by terms of any instrument which they sign or seal even though they did not read it or did not understand its contents - Exception to general rule where person signs or seals doc under mistaken belief as to nature of it - where person signs doc or executes deed in such instances, they may raise defence of non est factum (it is not my deed) eg bc of blindness/illiteracy/senility of person signing or trick/fraudulent misrep as to nature of doc provided that person took all reasonable precautions before signing
- Unilateral mistake as to identity of person contracted with: One party mistakenly believes that they are contracting with person that other party is pretending to be - whether or not void depends on precise circumstances
What will court assume in face to face contracts?
So in face to face court will presume that seller intended to deal with person in front of them and this is difficult presumption to rebut - requires seller to show that identity, not attributes (ie creditworthiness) was of vital importance
Why does it matter if contract is void for mistake or voidable for misrep?
Where contract for sale of goods is voidable, then until it is avoided title still passes from seller to buyer, albeit buyer’s title is voidable title (one that could later be avoided)
If buyer seeks to sell goods on to TP, this is relevant bc: ‘When the seller of goods [in the scenario above, this means the fraudster] has a voidable title thereto, but his title has not been avoided at the time of the sale, the buyer [in the scenario above, this means the third party acquires a good title to the goods, provided he buys them in good faith and without notice of the seller’s defect in title.’ (SGA)
On other hand, where identity of buyer is fundamental and contract is void for mistake, then it is void and ineffective from outset
Buyer (fraudster) has no title (voidable or otherwise) and cannot give any sort of title to TP by selling goods on
What is the situation in distance selling transactions?
Not every distance selling transaction will result in court finding contract void by mistake
In distance selling transaction easier for seller to show they intended only to deal with person named in correspondence and if proved finding of mistake will follow - mistake renders contract void and title will remain with original seller.
