Mistake Flashcards
3 categories of Common Mistake.
Res Extincta.
Res Sua.
Mistake as to quality.
The 3 categories of mistake.
Common, mutual and unilateral.
Common - where both parties make the same mistake
Mutual - where the parties are at a cross-purposes, but each believes that the other is in agreement
Unilateral - Where one party is mistaken and the other knows and takes advantage of the mistake.
Define ‘Common Mistake’.
With common mistake there is a complete agreement between the parties, but both are mistaken in regard to a fundamental point as to the existence or quality of the subject matter of the contract, or the possibility of performing the contract.
Define Res Extincta.
A mistake as to the existence of the subject matter of the contract.
Case example of Res Extincta and the brief facts.
Couturier v Hastie.
Sale of Indian corn in transit. Both parties believe corn existed. But in fact Captain of cargo sold it cos cargo became overheated and fermented the corn. Customary practice.
Claimant claimed saying that defendant accepted the risk and should pay for the corn.
Courts held NO. Contract void. Although no specific mention of mistake, they considered that common sense dictate that if SM of contract did not exist at formation, then the contract did not exist further.
This proposition is now contained in s6 of SOGA 1979.
One of 2 case under Res Extincta showing that when the SM did not exist or dead (hint), the contract will be set aside.
Scott v Coulson.
Claimant contracted to sell to D a policy of life insurance on the life of a 3rd party. However at the time of contract, Person is DEAD. The contract as set aside.
Where one party actually warrants the existence of the subject matter, and therefore carries the risk of its non-existence, the contract is valid. The mistake does not affect the contract.
Authority.
McRae v Commonwealth Disposals Commission.
Define ‘Res Sua’.
A shared mistake as to the ownership of the SM of the contract.
Case example for ‘Res Sua.’
Cooper v Phibbs.
Uncle. Fishery. Died. Nephew. Agreement. Rent. Uncle’s daughters. Actually belonged to him.
HOL: contract void at C/L.
A common mistake as to quality of SM of contract is not sufficiently fundamental to be an operative mistake to set aside a contract.
Authority.
Leaf v International Galleries.
Facts of Leaf v International Galleries.
Both Gallery and purchaser believed. Painting. Constable. 5 years. Sell. Found out. Considerably less. Sued.
COA: In the absence of an actionable misrepresentation OR assumption of risk, the contract was valid.
The mistake ‘was not of such a fundamental character as to constitute an underlying assumption without which the parties would not have made the contract they in fact made.’
Case.
Bell v Lever Brothers.
To render a contract void, the mistake of walkout must go to the ‘root of the contract’ / essentially different / sufficiently fundamental.
The 2 dudes that said this and in what case.
Lord Atkin and Lord Thankerton.
Bell v Lever Brothers.
The only case that was void as a result of mistake as to quality.
Nicholson and Venn v Smith-Merriott.
‘Crest of Charles’ napkins.
Hallet J awarded damages to the claimant and said that they could also avoided the contract on grounds of mistake.
However this authority has been weakened, by doubts cast upon its correctness by Denning in Solle v Butcher
Lord Atkin said regarding contracts in Bell v Lever Brothers.
It is of paramount importance that contracts should be observed.
and that if parties honestly comply with the essentials of the formation of contracts, I.e. agree on the same terms on the same subject matter, they are bound.
