topic 2

Question 1

The Consumer Rights Act 2015

Answer 1

The Consumer Rights Act 2015 comprises three Parts.

Part 1 deals with consumer contracts for goods, digital content, and services.

Part II regulates unfair terms (in consumer contracts).

Part III is of a miscellaneous and general nature.
Contracts between a consumer and a business entered into prior to 1 October 2015 are governed by the Sale of Goods Act 1979 or the Supply of Goods and Services Act 1982 and the Unfair Contract Terms Act 1977.

Question 2

Contracts for goods

Answer 2

The cornerstone rights implied in a consumer sale of goods are that:
1. (a) Goods should be of a satisfactory quality (s 9);
2. (b) Goods should be reasonably fit for any purpose which the consumer makes known to the trader that the consumer intends to use the goods for (s 10); and
3. (c) Where goods are sold by description the goods should match that description (s 11).

Question 3

consumer rights act remedies

Answer 3

The Consumer Rights Act 2015 provides that where goods sold to a consumer fail to meet any of the requirements in s 9 (satisfactory quality), s 10 (reasonably fit for their particular purpose) or s 11 (correspondence with description) then the goods are regarded as non-conforming. Where the goods are non-conforming, there are three remedial options available to the consumer, namely:
1. (a) The short term right to reject;
2. (b) The right to repair or replacement;
3. (c) The right to a price reduction or the final right to reject.

Question 4

Contracts for digital content

Answer 4

Where a consumer contracts for digital content—for example, for an e-book, a game or a music download—which rights does the Act specify to be included? In line with the provisions for consumer goods, the implied terms are that the digital content:
1. (a) Should be of satisfactory quality (s 34);
2. (b) Should be reasonably fit for purpose (s 35); and
3. (c) Should match any description of it given by the trader to the consumer (s 36).
According to s 34(2), the ‘quality of digital content is satisfactory if it meets the standard that a reasonable person would consider satisfactory’. Such a reasonable person would take account of matters of description and price together with ‘all other relevant circumstances’ (s 34(2)(c)), such circumstances including ‘any public statement about the specific characteristics of the digital content made by the trader, the producer or any representative of the trader or producer’ (s 34(5)).

Question 5

Consumer Rights Act Digital Content - Remedies

Answer 5

Section 42 provides that, where the digital content is non-conforming in breach of the terms implied by ss 34 (satisfactory quality), 35 (fitness for purpose) and/or 36 (matching description), there are two remedial options available to the consumer, namely:
* The right to repair or replacement; and
* The right to price reduction.

Question 6

Contracts for services

Answer 6

What are the statutory rights of a consumer under a services contract? Most importantly, the consumer has a right:
1. (a) That the service is performed with reasonable care and skill (s 49);
2. (b) That (where a price has not been agreed) a reasonable price is to be paid (s 51); and
3. (c) That (where a time has not been fixed) the service is provided in a reasonable time (s 52).
In addition, s 50(1) also provides that anything that is said or written to the consumer, by or on behalf of the trader, about the trader or the service is to be included as a term where it is taken into account by the consumer:
(a) When deciding to enter into the contract; or
(b) When making any decision about the service after entering into the contract.

Question 7

Consumer Rights Act - Contracts for Services - Remedies

Answer 7

1. Section 54 provides that, where the services are non-conforming in breach of the term implied by ss 49 (reasonable care and skill), there are two remedial options available to the consumer, namely:
2. (a) The right to require repeat performance; and
3. (b) The right to a price reduction.

Question 8

Conditions and warranties

Answer 8

The terms of a contract (whether express or implied) can be classified as conditions, warranties or innominate terms.
As a general principle, if a party breaches a condition, the innocent party has a right to treat the contract as repudiated ie they can terminate the contract, put an end to it with the effect that both parties are released from all future obligations under the contract. The innocent party may also sue for damages immediately.

Question 9

distinction between condition and warranty

Answer 9

According to the traditional approach, the distinction between a condition and a warranty is that a condition is an important term ‘going to the root of the contract’ (Poussard v Spiers (1876) 1 QBD 410). A warranty is a less important term not going to the root of the contract.

The crucial question is, whether the parties intended, at the time of contracting, that any breach of the relevant term could result in the innocent party terminating (see Poussard v Spiers again). Only if the answer to this question is clearly ‘yes’ should the term be categorized as a condition from the outset.

Question 10

starting position as to whether the term in question has been classified as a condition or a warranty

Answer 10

Look at:

i) statute; ii) the parties or iii) previous judicial decision(s).

If that does not provide an answer, then the court will need to look at the contract, the subject matter and the surrounding facts to determine whether the parties intended for any breach of the term to entitle the innocent party to terminate the contract (this is where the ‘root of the contract’ test may be relevant). If the court cannot determine the parties’ intention, or determines that their intention was that not every breach would lead to the right to terminate, then the court is likely to decide that the term is innominate, and apply the test from Hong Kong Fir.

Question 11

Categories of term breached

Answer 11

Condition: An important term going to the root of the contract. A party that has committed a breach of a condition is said to have committed a repudiatory breach.
Warranty: A less important term not going to the root of the contract.
Innominate term: A term which at the outset is neither a condition or warranty but is of an intermediate nature.
Repudiatory breach: A party that has committed a breach of condition is said to have committed a repudiatory breach. Generally, the innocent party has a right to treat the contract as repudiated ie they can terminate the contract.

Question 12

Exemption clauses

Answer 12

Exemption clause: A contractual term that purports to limit or exclude a liability that would otherwise attach to one of the contracting parties.

Question 13

Construction of exemption clauses

Answer 13

(a) Incorporation - is the exemption clause part of the contract?
(b) Construction - does the clause cover the alleged breached
(c) Statutory controls - what is the effect on the clause of the Unfair Contract Terms Act 1977 and Consumer Rights Act 2015

Question 14

Exemption clauses can be drafted in a variety of ways. They will generally have two or more of the following elements:

Answer 14

(a) A statement of whether liability is entirely excluded or only limited to a stated amount.
(b) A statement of which types of claim/duties the exemption relates to.
(c) A statement of which types of loss the exemption relates to.

Question 15

Contra proferentem

Answer 15

The general rule is that exemption clauses will be construed contra proferentem. This means that if there is any doubt as to the meaning and scope of the exemption clause, the ambiguity will be resolved against the party (the ‘proferens’) seeking to rely upon it. Clear words must be used if they are to excuse one party from its liability.

Question 16

Exemption clauses and negligence

Answer 16

Clear words must be used if a party is seeking to exclude liability resulting from its own negligence. The requirement is most obviously met where the word ‘negligence’ itself is used and, in practice, most drafters will avoid ambiguity by using the word negligence.
The requirement may be satisfied if the words do not expressly refer to negligence but are nevertheless wide enough to extend to negligence (eg ‘all liability howsoever caused’). However, if general words are used their effectiveness may depend on the following distinction:
(a) Cases where the only basis for liability is negligence
(b) Cases where the party will be liable irrespective of negligence

The requirements referred to above are sometimes called the ‘Canada Steamship rules’ after the case Canada Steamship Lines v R [1952] AC 192

Question 17

Third parties and exemption clauses

Answer 17

Even if the excluding or limiting term is incorporated into the contract and sufficiently clear and unambiguous, the question may still arise as to whether the clause can operate to protect a person who is not party to the contract.
The doctrine of privity of contract establishes that, at common law, a party outside the contract cannot benefit from its terms. Nor can that party have an obligation imposed upon it by the contract. The doctrine applies to an exemption clause in just the same way it would to any other kind of clause.

Question 18

Unfair Contract Terms Act 1977

Answer 18

If the clause has been incorporated into the contract and, properly construed, excludes/limits the liability being considered, then you must move on to consider:
(a) In the case of contracts between businesses, the Unfair Contract Terms Act 1977 (UCTA); and
(b) In the case of contracts between a business and a consumer, the Consumer Rights Act 2015 (CRA).

Question 19

purpose of unfair contract terms act

Answer 19

An Act to impose further limits on the extent to which […] liability for breach of contract, of for negligence or other breach of duty, can be avoided by means of contract terms and otherwise
This purpose is achieved by provisions that ensure:
1. Certain types of exemption clause have no effect; and
2. Other types of exemption clause are effective only so far as they satisfy the requirements of reasonableness.

Question 20

Scope of UCTA

Answer 20

Secondly, s 1(3) of UCTA states that the operative provisions of UCTA (sections 2 to 7) apply only to ‘business liability’. Accordingly, unless you are dealing with this type of liability, UCTA will generally not apply.
Section 1(3) sets out a definition of ‘business liability’ as follows: […] liability for breach of obligations or duties arising:
(a) from things done or to be done by a person in the course of a business (whether his own business or another’s); or
(b) from the occupation of premises used for business purposes of the occupier; and references to liability are to be read accordingly […]
The combined effect of these two considerations is (broadly) that:
(a) Where both parties are acting in the course of a business, UCTA applies;
(b) Where one parties is acting in the course of a business and the other party is not, the CRA 2015 applies;
(c) Where neither party is acting in the course of a business, neither statutory regime applies.

Question 21

Scope of UCTA - negligence liability

Answer 21

Negligence for the purposes of UCTA is defined in s 1(1), and includes breach of:
(a) Any obligation, arising from the express or implied terms of a contract, to take reasonable care or exercise reasonable skill in the performance of the contract;
(b) Any common law duty to take reasonable care or exercise reasonable skill

Question 22

UCTA - Exempting liability for death or personal injury resulting from negligence

Answer 22

Section 2(1) of UCTA provides that:
A person cannot by reference to any contract term or to a notice given to persons generally or to particular persons exclude or restrict his liability for death or personal injury resulting from negligence
Accordingly, any attempt to exclude or restrict liability for death or personal injury resulting from negligence will be void.

Question 23

UCTA - Exempting liability for other loss resulting from negligence

Answer 23

In relation to other loss or damage (for example, damage to personal property) resulting from negligence, s 2(2) of UCTA provides: a person cannot so exclude or restrict his liability for negligence except in so far as the term or notice satisfies the requirement of reasonableness

Question 24

UCTA - Exempting liability for breach of statutory implied terms about quality of goods

Answer 24

Section 6(1A) of UCTA provides that liability for breach of s 13-15 of the Sale of Goods Act 1979 (seller’s implied undertakings as to conformity of goods with description or sample, quality or fitness for a particular purpose): […] cannot be excluded or restricted by reference to a contract term except in so far as the term satisfies the requirement of reasonableness.

Question 25

Exempting liability arising in contract

Answer 25

Pursuant to s 3, where any party deals on its own written standard terms of business (s 3(1)), that party cannot rely on a contract term to exclude or limit its liability in the event it commits any breach of contract, except so far as the term passes the reasonableness test (s 3(2)(a).
Similarly, under 3(2)(b)(i & ii) a party cannot by reference any contract term claim to be entitled to:
* Render a contractual performance substantially different from that which was reasonably expected (s 3(2)(b)(i)); or
* Claim to be entitled in respect of the whole or any part of the contractual obligation, to render no performance at all (s 3(2)(b)(ii)).
Although UCTA does not define ‘deals on written standard terms of business’, the courts appear to take a relatively common-sense approach.

Question 26

Reasonableness test (s 11 & schedule 2)

Answer 26

The UCTA reasonableness test is set out in s 11(1). In order to pass the UCTA reasonableness test, the term:
[…] shall have been a fair and reasonable one to be included having regard to the circumstances which were, or ought reasonably to have been, known to or in the contemplation of the parties when the contract was made.

Question 27

Consumer Rights Act 2015 (exemption clauses) - Exempting liability for death or personal injury resulting from negligence

Answer 27

Section 65(1) of CRA provides that:
A trader cannot by a term of a consumer contract or by a consumer notice exclude or restrict liability for death or personal injury resulting from negligence
Accordingly, any attempt to exclude or restrict liability for death or personal injury resulting from negligence will not be binding on the consumer.
Negligence for the purposes of this section is defined in s 65(4), and includes breach of:
1. Any obligation, arising from the express or implied terms of a contract, to take reasonable care or exercise reasonable skill in the performance of the contract;
2. Any common law duty to take reasonable care or exercise reasonable skill; and
3. The common duty of care imposed by the Occupiers’ Liability Act 1957.

Question 28

Consumer Rights Act 2015 (exemption clauses) - Exempting liability for breach of statutory implied terms about goods

Answer 28

Section 31 of CRA provides that any attempt to exclude or restrict liability for the following terms implied by the CRA will not be binding on the consumer:
1. Section 9 – goods to be of satisfactory quality
2. Section 10 – goods to be fit for particular purpose
3. Section 11 – goods to be as described.

Question 29

Consumer Rights Act 2015 (exemption clauses) - Exempting liability for breach of statutory implied terms about digital content

Answer 29

Section 47 of CRA provides that any attempt to exclude or restrict liability for the following terms implied by the CRA will not be binding on the consumer:
(a) Section 34 – digital content to be of satisfactory quality
(b) Section 35 – digital content to be fit for particular purpose
(c) Section 36 – digital content to be as described.

Question 30

Consumer Rights Act 2015 (exemption clauses) - Exempting liability for breach of statutory implied terms about services

Answer 30

Section 57 of CRA provides that any attempt to entirely exclude the following term implied by the CRA will not be binding on the consumer:
(a) Section 49 – service to be performed with reasonable care and skill.

Question 31

Consumer Rights Act 2015 - Regulation of terms other than exemption clauses

Answer 31

As well as the specific regulation of exemption clauses as set out above, the CRA provides that any term in a consumer contract is not binding on the consumer if it is unfair (s 62). However, terms specifying the main subject matter of the contract cannot be assessed for fairness, nor can the court assess the fairness of the price for the goods, digital content or services concerned provided that the terms are transparent and prominent (s 64).
A term is unfair if, contrary to the requirement of good faith, it causes a significant imbalance in the parties’ rights and obligations under the contract to the detriment of the consumer (s 62(4)).

Question 32

CRA - Anti-avoidance provisions

Answer 32

As you can see, CRA makes certain provisions exempting/limiting liability not binding on the consumer. In this sense, it restricts parties’ contractual freedom. Parties might try to get around these limitations in a number of ways, but CRA has most such avenues covered.

Question 33

misrepresentation key words

Answer 33

Representation: A statement asserting the truth of a given state of facts.

Representor: The party who allegedly made the representation.

Representee: The party who allegedly received the representation.

Misrepresentation: An unambiguous false statement of fact made to the claimant and which induces the claimant to enter into the contract with the statement maker.

An actionable misrepresentation is: An unambiguous false statement of fact made to the claimant and which induces the claimant to enter into the contract with the statement maker.

Question 34

Elements of an actionable misrepresentation - unambiguous

Answer 34

Unambiguous: The representation must be clear and will only form the basis of a claim in misrepresentation if it unambiguously has the meaning put forward by the representee.

Question 35

Elements of an actionable misrepresentation - False

Answer 35

The statement must be false. It will not be false if it is substantially correct

Question 36

Elements of an actionable misrepresentation - Statement of fact

Answer 36

To be actionable, a representation must be a statement of fact ie ‘a representation is not an undertaking to do, or not to do something. It is a statement asserting a given state of affairs’ Kleinwort Benson Ltd v Malaysia Mining Corp [1989] 1 WLR 379. Mere advertising ‘puff’ will not qualify as a representation. Statements are usually made by words, but statements of fact can also be made by conduct. A statement of law can also give rise to an actionable misrepresentation.

Question 37

Elements of an actionable misrepresentation - Addressed to the claimant

Answer 37

The misrepresentation must be addressed by the representor to the claimant.

Question 38

Elements of an actionable misrepresentation - Induces the claimant to enter into the contract with statement maker

Answer 38

The representation must have caused the representee to enter into the contract in order to be an actionable misrepresentation.

Question 39

inducement

Answer 39

As the representation must have induced the representee to enter the contract, there is no actionable misrepresentation where:
1. (a) The statement was not actually communicated to the representee; or
2. (b) The statement did not affect the representee’s decision to enter the contract; or
3. (c) The statement was known to be untrue by the representee.

Question 40

misrep - Statements of fact

Answer 40

At the heart of the law of misrepresentation is the concept of a false statement of fact.
As a general rule, statements of opinion, statements of future intention and silence will not normally amount to statements of fact on which a claim for misrepresentation can be based.

Question 41

statements of opinion

Answer 41

A statement of opinion is not a statement of fact. Usually, it cannot form the basis of a claim in misrepresentation.

However, when someone expresses an opinion, they impliedly state that they know facts which justify their opinion. Where the same facts are known to each party, this implicit statement is unlikely to have much impact on the representee, as the representee can determine whether the facts justify the opinion themselves. However, if the representor is considered to have greater knowledge than the representee, then the implied statement that there are facts which justify the opinion can significantly mislead the representee.

An expression of opinion is a representation that the statement maker believes the opinion that they express. Such a representation will be a misrepresentation if in fact the opinion expressed is not one which the representor held.

Question 42

Statement of future intention

Answer 42

There is a clear difference between a representation of fact and a representation that something will be done in the future. A representation that something will be done in the future cannot be true or false at the moment it is made; and although you may call it a representation, if anything it is a contract or promise - Beattie v Ebury (1872) LR 7 Ch App 777, per Mellish LJ

Consequently, it is not a misrepresentation if the representor makes a promise regarding a future intention but is prevented from following that course of conduct or if circumstances alter so that they change their mind about that intention.

However, if the representor states that they intend to do something, then they are making a limited statement fact: they are stating that they do have that intention. So if, at that point in time, they know that they cannot do what they state, or they do not intend to do it, they misrepresent their existing intention (Edgington v Fitzmaurice (1885) 29 Ch D 459).

Question 43

Silence

Answer 43

In most cases, mere silence will not give rise to an action for misrepresentation. It is not a statement, whether of fact or otherwise. Accordingly, the general rule is that there is no duty to disclose facts which, if known, might affect the other party’s decision to enter the contract.

There are a number of recognised exceptions. These are:
(a) Half-truths;
(b) Continuing representations; and
(c) Contracts uberrimae fidei (utmost good faith): exception to silence

Question 44

Categories of misrepresentation

Answer 44

Due to important changes brought about by the Misrepresentation Act 1967 (MA 1967) the categories of misrepresentation that are available today are:

Fraudulent (tort of deceit)
- Key case: Derry v Peek (1889) 14 App Cas 337: Lord Herschell said: First, in order to sustain an action of deceit, there must be proof of fraud, and nothing short of that will suffice. Secondly, fraud is proved when it is shown that a false representation has been made (a) knowingly, or (b) without belief in its truth, or (c) recklessly, careless whether it be true or false. Although I treated the second and third as distinct cases, I think the third is but an instance of the second, for one who makes a statement under such circumstances can have no real belief in the truth of what he states […].Thirdly, if fraud be proved, the motive of the person guilty of it is immaterial. It matters not that there was no intention to cheat or injure the person to whom the statement was made.
- The claimant had failed to show knowledge that the statement was false or an absence of belief in its truth, and therefore the false statement in the prospectus was not fraudulent.
- Note that where a misrepresentation is not fraudulent, it may still be negligent, as considered later in this section under the requirements of s 2(1) of the Misrepresentation Act 1967

Negligent (statutory claim under s 2(1) of the MA 1967)
- The defendant will be liable for negligent misrepresentation under s 2(1) unless they can prove that they had reasonable grounds to believe, and did believe up to the time the contract was made, that the statement was true.
- Moreover, following the (sometimes criticised) decision in Royscot Trust Ltd v Rogerson [1991] 2 QB 297, s 2(1) also has the effect that, where a representor is found liable for a negligent misrepresentation, they will be treated to all intents and purposes as if they had made a fraudulent misrepresentation. This has important ramifications as regards damages.

Innocent (also a statutory claim under s 2(1) of the MA 1967)
- The definition of innocent misrepresentation also derives from s 2(1) of the MA 1967. Logically therefore, the definition of an innocent misrepresentation is a statement made where the representor:
(a) Proves that they had reasonable grounds for belief in the truth of their statement; and
(b) Proves that they believed up to the time of the contract that what they were saying was true.

Question 45

Remedies for misrep

Answer 45

Rescission
The effect of misrepresentation is to render the contract voidable but not void. Accordingly, the contract is still valid and subsisting until the representee decides to set it aside (rescind the contract). The remedy of rescission is available in principle for any type of misrepresentation.
The general rule is that, in order to rescind, the representee must communicate the intention to do so to the representor.
Rescission is an equitable remedy and is given (or withheld) entirely at the discretion of the court – so a party can establish misrepresentation but the court still has the discretion not to award rescission. Generally, rescission will be awarded only where the parties can be restored to their original position by returning all the property transferred between the parties under the contract.
Indemnity
It is possible that, as part of the equitable process of rescission, an indemnity may be awarded to cover expenses for obligations assumed as a direct result of the contract.
For example, if a representee is induced into buying a leasehold property by a misrepresentation, obligations arising from the purchase such as council tax, service charge and so forth would be covered by an indemnity. The obligations must have been created by the contract. Generally, where an action for misrepresentation will give a right to damages (ie an action for fraudulent or negligent misrepresentation), an indemnity will not be awarded.
Damages
Damages for misrepresentation are potentially the greatest where the misrepresentation is a fraudulent one. However, it must be borne in mind that damages for an action for negligent misrepresentation, under s 2(1) MA 1967, will often match those that would be available for fraudulent misrepresentation.

Question 46

remedies for misrep - damages in further detail

Answer 46

Damages for fraudulent misrepresentation: A party who has been deceived by a fraudulent misrepresentation may sue for damages. Fraudulent misrepresentation is part of the tort of deceit, and this is reflected in the way damages are calculated on the ‘tortious’ basis. The measure of damages is that which is necessary to place the innocent injured party in the position they would have been in had the misrepresentation not been made.
Damages for negligent misrepresentation under s 2(1) MA 1967: Section 2(1) of the MA 1967 provides:
Where a person has entered into a contract after a misrepresentation has been made to him by another party thereto and as a result thereof he has suffered loss, then, if the person making the misrepresentation would be liable to damages in respect thereof had the misrepresentation been made fraudulently, that person shall be so liable notwithstanding that the misrepresentation was not made fraudulently, unless he proves that he had reasonable grounds to believe and did believe up to the time the contract was made that the facts represented were true.
The court has confirmed that the effect of s 2(1) of the MA 1967 is that the correct measure of damages for negligent misrepresentation must be based on the tort of deceit (Royscot Trust v Rogerson (1991)).
Damages for innocent misrepresentation: Where an innocent misrepresentation has been made, the representee is only entitled to the remedy of rescission and, if applicable, an indemnity to cover the cost of the legal obligations arising from the contract entered into. There is no automatic right to damages for an innocent misrepresentation but, as with negligent misrepresentation (above), the court has the discretion under s 2(2) to award damages in lieu of rescission

Question 47

Misrepresentation and exemption clauses

Answer 47

If a contract contains an exemption clause purporting to protect a party from liability for misrepresentation or purporting to exclude or restrict any remedy available to the other party, the clause will be of no effect except in so far as it satisfies the requirement of reasonableness: s 3 Misrepresentation Act 1967 (MA 1967) as substituted by s 8 of the Unfair Contract Terms Act 1977.
Section 3 provides:
If a contract contains a term which would exclude or restrict:
(a) any liability to which a party to a contract may be subject by reason of any misrepresentation made by him before the contract was made; or
(b) any remedy available to another party to the contract by reason of such a misrepresentation

Question 48

Non-reliance clauses

Answer 48

A party may wish to exclude liability for misrepresentations. It is doubtful whether an ‘entire agreement’ clause, which states that the agreement constitutes the entire agreement between the parties, would be sufficient to exclude liability for any misrepresentations. If a party wants to exclude liability for misrepresentations, a clause such as the following might be desirable.

Question 49

Alternative claims to misrepresentation - Representations distinguished from terms of a contract

Answer 49

A representation may become a term of the contract if the court decides it is incorporated into the contract. The way in which terms are incorporated into a contract is not addressed in this chapter. If the court decides that a representation is a term, and it is false, this will give rise to an action for both breach of contract and potentially for misrepresentation (if the misrepresentation is actionable).
If, on the other hand, a representation is not deemed to be incorporated into the contract then it will remain a representation. In this case, the only option is to pursue an action for misrepresentation.

Question 50

Alternative claims to misrepresentation - Negligent misstatement at common law (tort of negligence)

Answer 50

The law of misrepresentation intervenes in relation to false statements which induce the representee to enter into a contract.
There is another area of law which could intervene in relation to false statements. That is the law of negligent misstatement, which is part of the law of negligence. Very broadly, where there is a relationship of sufficient proximity between two parties, the court might find that one party owes a duty of care to the other to take reasonable care that statements made are accurate. This duty would extend to statements made during contractual negotiations, but it would not be limited to such statements – it could relate to any statements that caused the recipient of the statement loss.

Question 51

Operative mistake

Answer 51

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 52

Void

Answer 52

A contract which is void has no legal effect from the outset.

Question 53

Categories of mistake - common mistake

Answer 53

Common mistake
- Common mistake occurs where both parties to an agreement are suffering from the same misapprehension.
- It is necessary to consider whether the underlying common mistake is sufficiently fundamental to affect the validity of the contract.
- It has been suggested that there is a limited category of cases where the mistake is so severe that the contract will be void for mistake as to quality. The test to be applied to engage this exception is unclear. It could be a question of whether the mistake is such that the subject matter is ‘essentially different’ from that intended (Bell v Lever Brothers [1932] AC 161), or alternatively whether the mistake renders the assumed performance ‘impossible’, or alternatively whether the subject matter is rendered ‘radically different’.
- Circumstances where common mistake will not operate
(a) The mistake is not sufficiently fundamental.
(b) One party is at fault.
(c) The contract makes provision for the issue.

Question 54

Categories of mistake - mutual mistake

Answer 54

Mutual mistake
- Mutual mistake occurs where both parties are mistaken but they are mistaken about different things. In other words, they have negotiated at cross purposes.

Question 55

Categories of mistake - unilateral mistake

Answer 55

Unilateral mistake
- Unilateral mistake occurs where only one party is mistaken and the other party knows, or is deemed to know, of the mistake.
- Where unilateral mistake has occurred, the acceptance does not correspond with the offer, and there is consequently no real agreement reached.