Mistake and Illegality

Question 1

What is a mistake and its consequences?

Answer 1

Operative mistake – recognise in contract law as preventing a contract from taking legal effect
Void – a contract which is void has no legal effect from the outset.

Question 2

What is common mistake?

Answer 2

• Where both parties are suffering from same misapprehension
• Whether its sufficiently fundamental to affect validity of contract.
• Limited category of cases where the mistake is so severe that the contract will be void (like contract never existed) for mistake as to quality.
• If subject matter is essentially different from intended

Question 3

Mutual mistake?

Answer 3

• Both parties are mistaken but about different things.
• Will be declared VOID
• Courts will employ an objective test and decide what a reasonable third party would think the agreement was.

Question 4

Unilateral mistake?

Answer 4

• Where one party is mistaken and other party knows of the mistake
• Circumstances in where this will success is very tightly restrained
  AS TO NATURE OF DOCUMENT SIGNED - void is mistake is due to blindness, illiteracy or fraud
  MISTAKEN IDENTITY - void but very hard to show in face to face transactions
  FACE TO FACE - Lewis v Averay – very heavy burden – voidable for misrepresentation but not mistake
  Court will assume you intended to transact with person in front.

Question 5

Difference between Void and Voidable?

Answer 5

Voidable contract
Title passes until it is recission – voidable contract – title can pass- bar to recission for innocent third party

If its void for mistake – keep hold of title

Question 6

What is illegality?

Answer 6

General rule is a contract to perform an illegal act would be declared void and unenforceable following Patel this general principle no longer exists

supreme court held underlying policy was whether allowing recovery for something which was illegal would produce inconsistency and disharmony in the law. In order to check:
- Consider underlying purpose of prohibition which has transgressed
- Consider any relevant public policy
- To consider whether denial of claim would be propionate response to illegality bearing in mind punishment is a matter for criminal courts