mistake (workbook) Flashcards
what is an operative mistake?
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.
what is a void contract?
A contract which is void has no legal effect from the outset.
what are the three categories of mistake?
- common mistake
- mutual mistake
- unilateral mistake
what is common mistake?
occurs where both parties made the same mistake
example of common mistake
A seller agrees to sell to the buyer some corn which is being transported on a particular ship.
Without either party knowing, that corn has in fact been destroyed prior to the contract.
Unless the contract is interpreted as providing for this possibility, then the contract is void.
restrictions as to common mistake - where a fact or quality is fundamental to the agreement
Leaf v International Galleries:
- although Leaf’s claim was for misrepresentation, the court stated, obiter, that a claim in mistake in relation to a painting both the buyer and seller mistakenly believed to be a Constable would fail.
- the parties had contracted for the sale of a Constable, and the buyer received a Constable under the contract.
- however, remedy for misrep may be available.
when will common mistake not operate?
(a) The mistake is not sufficiently fundamental.
(b) One party is at fault.
(c) The contract makes provision for the issue.
what is mutual mistake?
occurs when the parties are mistaken about different things, negotiating with different purposes
example of mutual mistake
A agrees to sell a horse to B. A intended to sell his chestnut horse, but B thought he was agreeing to buy A’s grey horse.
Needless to say, the colour of the horse was not mentioned during the formation of the contract.
what test is used to determine mutual mistake?
an objective test - what would a reasonable third party believe the agreement to be based on the words and conduct of the parties?
what might be the possible outcomes of the objective test for mutual mistake?
- the agreement was that
which A understood it to be; or - that which B understood it to be, or
- no meaning can be attributed to the agreement at all
ie if a reasonable person would infer the existence of a contract in a given sense, the court will hold that a contract in that sense is binding upon both parties, notwithstanding a material mistake.
what is unilateral mistake?
occurs where only one party is mistaken, and the other party knows, or deemed to know, of the mistake
what is an example of unilateral mistake as to the expression of intention?
Hartog v Colin & Shields:
The defendants’ offer to pay 10d per pound of hare skins (instead of the intended 10d per piece) was not an accurate reflection of their true intention and that there was no binding contract.
The claimants could not ‘snap up’ an offer when that party was aware that the other had made a mistake relating to the offer terms.
what is the general rule as to unilateral mistake as to the nature of the document signed?
a person is bound by the terms of any instrument which they sign or seal
even though they did not read it or did not understand its contents
what is the exception to the general rule that a person is bound by the terms of any instrument which they sign or seal
even though they did not read it or did not understand its contents?
the defence of non est factum (‘it is not my deed’) will be available:
(a) Due to the blindness, illiteracy, or senility of the person signing; or
(b) A trick or fraudulent misrepresentation as to the nature of the document, provided that
person took all reasonable precautions before signing.
categories of mistake and their consequences
what happens to title/ownership if the contract is void for mistake?
void = null from the outset
this means the buyer never obtained title in the first place, and therefore cannot pass title onto third parties (nemo dat quod non habet(. because the third party has no title, the third party must return the goods to the duped seller, even if the third party paid good money and knew nothing about the deception.
what happens to title/ownership if the contract is voidable for misrepresentation?
‘voidable’ = the contract can be brought to an end/avoided, but until that happens, it remains in force.
title will pass from seller to buyer, but unless the third party knows about or has reason to suspect deception, the the buyer’s title cannot be avoided at a later date
ie the seller will be without a remedy
