SQE2 Contract: Mistake

Question 1

What are the different types of mistake?

Answer 1

Common Mistake

Mutual Mistake

Unilateral Mistake

Mistake as to Identity

Non Est Factum

Question 2

What is of common mistake and what is the effect?

Answer 2

Contract void

• When parties are in agreement but both have made same mistake
• Typically in respect of existence of subject matter of contract

Exception
- mistake as to quality not sufficient

Question 3

What is of mutual mistake and what is the effect?

Answer 3

Void

Where parties are mutually mistaken but about different things

Test:
- Court will consider whether a reasonable person would take the agreement to mean what each party did
- If result is ambiguous contract then no agreement

Question 4

What is a unilateral mistake and what is the effect?

Answer 4

Void

• Where one party is mistaken as to terms of contract and
• Other party is aware of mistake, or should be aware of it

Exception
- Mistake as to quality not sufficient

Question 5

What is Mistake as to Identity and effect?

Answer 5

one party mistakenly believes they are contracting with a person that the other party is pretending to be

Void if:
- if C can show that identity of buyer and not their attributes was of vital importance
- would not have entered contract had they known
- more likely in distance vs face to face transaction

Not Void if:
- if they would have entered contract irrespective of identity
- may be able to claim misrepresentation (but this makes it voidable so if subject matter has been sold to bona fide purchaser for value C may have no remedy)

Question 6

What is rectification of mistake and when is it available?

Answer 6

• it is open to courts to rectify mistake if there was a common intention of parties that was not recorded accurately
• common intention can be deduced from evidence of each parties understanding

Cannot be used if:
- inequitable such as if 3rd party has acquired rights under contract

Question 7

When might a contract be effected by illegality?

Answer 7

1. Illegal at formation = void
2. Supervening illegality = frustration
3. Illegal in performance = party who acted illegally cannot enforce terms

Question 8

When are contracts or clauses that restrain trade permitted?

Answer 8

1 Reasonable
- geographic scope and length
- is it negotiated with legal advice
- are they acting in normal commercial relationship

2. Party can show that it is reasonably necessary for protection of its legitimate interest

Question 9

What is the effect of: mistake, duress , undue influence, illegality (at formation vs at performance) and misrepresentation?

Answer 9

Mistake
- void

Duress
- voidable

Undue Influence
- voidable

Illegality at formation
- void

Illegality at performance
- unenforceable by party committing illegal act

misrepresentation
- voidable