mistake and illegality

Question 1

What is the definition of an operative mistake?

Answer 1

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

Question 2

What are the 3 categories of mistake & their definitions?

Answer 2

1. common = occurs where both parties to agreement are suffering from same misapprehension.
2. mutual = occurs where both parties are mistaken but they’re mistaken about different things. So, they have negotiated at cross-purposes, never a real agreement.
3. unilateral = occurs where only one party is mistaken and the other party knows, or is deemed to know, of the mistake, no real agreement reached.

Question 3

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

Answer 3

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

Question 4

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

Answer 4

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 5

What are the 3 main potential types of unilateral mistake?

Answer 5

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 6

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

Answer 6

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 7

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

Answer 7

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.

Question 8

What are the ‘trio of necessary conditions’ for illegality?

Answer 8

a) ‘to consider underlying purpose of prohibition which has been transgressed and whether that purpose will be enhanced by denial of the claim,

b) to consider any other relevant public policy on which denial of the claim may have an impact; and

c) to consider whether denial of claim would be a proportionate response to illegality, bearing in mind that punishment is a matter for criminal courts.