Mistake and illegality

Question 1

what does mistake mean in contract law?

Answer 1

an operative mistake is a mistake which is recognised in contract law preventing contract from taking legal effect

Question 2

if there is a mistake in contract - how does this effect the validity of the contract?

Answer 2

the contract is void so has no legal effect from the outset

Question 3

what are the 3 types of mistake?

Answer 3

1. common mistake
2. mutual mistake
3. unilateral mistake

Question 4

what is common mistake?

Answer 4

occurs when both parties to an agreement are suffering from the same misapprehension

Question 5

what is a mutual mistake?

Answer 5

occurs when parties are mistaken but mistaken about different things

Question 6

what is a unilateral mistake?

Answer 6

only one party is mistaken and the other party knows, or is deemed to know, of the mistake

Question 7

if there is a mistake about the quality of goods - is the contract still valid?

Answer 7

yes it is still valid, this doesnt void the contract (even if mistake as to quality affects the utility of the goods to the buyer or alternatively affects value of goods in question)
common mistake

Question 8

when does common mistake allow for a contract to be void on mistake as to quality?

Answer 8

when the mistake of the subject matter is ‘essentially different’ from that intended, or alternatively whether mistake renders assumed performance ‘impossible’ or alternatively whether subject matter is rendered ‘radically different’

Question 9

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

Answer 9

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

Question 10

what test do the courts use to see if there is a mutual mistake?

Answer 10

objective test - would a reasonable third party believe the agreement to be based on the words and conduct of the parties themselves

Question 11

what is the general rule that if a person signs something but doesnt read or understand the contract?

Answer 11

the contract is still valid

Question 12

what is an exception to the rule that if a person signs contract but doesnt read or understand contract?
(what needs to be proved for defence of non est factum (not my deed)?

Answer 12

This defence is available when mistake due to either:
- Blindness, illiteracy, or senility of the person signing; or
- Trick or fraudulent misrepresentation as to nature of the document, provided person took all reasonable precautions before signing

Question 13

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

Answer 13

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.

Question 14

what is the general presumption as to the validity of a contract in face-2-face contracts where there is unilateral mistake?

Answer 14

that the contract formed is voidable (as presumed seller intended to contract with person in front of them) can rebut this presumption though if prove the identity of the buyer was important and not the attributes

Question 15

how can a person rebut the general presumption in face-2-face contracts with unilateral mistake?

Answer 15

persuade the court that the identity of the buyer and not their attributes was of vital importance to the contract.

Question 16

if a contract is distance selling situation and there is a unilateral mistake - what is the court’s general approach?

Answer 16

that mistake is more likely as easier for seller to show they intended to deal with person named in correspondence and if proved a finding of mistake will follow.

Question 17

what is effect of mistake on a third party?

Answer 17

mistake renders a contract void and therefore, title will remain with the original seller and cannot be passed on to the third party.

Question 18

what is the difference between a contract that is void and a contract that is voidable?

Answer 18

contract is void from outset (eg, mistake)
whereas voidable refers to the fact that the contract can be bought to an end/avoided but until that happens it remains in force.

Question 19

what are the 3 things that need to be considered when deciding ‘illegality’?

Answer 19

1. consider the underlying purpose of the prohibition and whether that purpose will be enhanced by denial of the claim
2. consider any other relevant public policy on which denial of claim may have an impact on; and
3. consider whether denial of the claim would be a proportionate response to illegality, bearing in mind that punishment is a matter for the criminal courts.

Question 20

what is the key question that needs to be considered for illegality (Patel v Mirza)?

Answer 20

whether allowing recovery for something which was illegal would produce inconsistency and disharmony in the law, and so cause damage to the integrity of the legal system’