Unilateral Mistake as to Terms - Assumptions

Question 1

Unilateral mistakes definition?

Answer 1

• Unilateral mistake — only one party is mistaken as to the subject matter or terms of the contract, and the other party subjectively knows that the other party is mistaken yet nevertheless accepts the offer in order to capitalize off of this, and forms the contract. In other words, they are still snapping at the mistake.
  o Here there is no meeting of the minds because one party is labouring off the other party’s mistake.
  o in contrast to common mistakes, where both parties are in mistake
• How it happens:
  o You are mistaken as to the terms of the contract, I know that you are mistaken, I purport to accept the contract notwithstanding the mistake and capitalize on your mistake, and now hold you to this contract.
  o You are unhappy about this because you were mistaken so you want out of the contract, so you try to prove that there was a unilateral mistake.

Question 2

What is the remedy for unilateral and common mistakes?

Answer 2

• void ab initio
  o void from the beginning
  o the effect of void ab initio is very harsh, and as a result, the test is very narrow.
  o Once the test is cancelled, the contract never existed at all.
  o Is typically used as a defence to a breach of contract saying there was no existence of a contract to begin with.

Question 3

Smith v Hughes (Test for Unilateral Mistake)

Answer 3

it sets out what the proper test is to establish void ab initio
The test:
1. one party must be mistaken as to the terms (promises) of the contract, and
2. the other must know that the other party is mistaken as to the terms of the contract, subjectively, and is snapping at this mistake,
à if you prove this, then the contract is invalid and is void ab initio

It draws a distinction between the following:
- Difference between terms and assumptions.
- You are typically making deals in an assumption that they are in your good interest, but these don’t count here. The mistake must be for a term, not merely an assumption.
o That a term of the contract was about about old oats, not merely assuming you were going to hopefully get old oats.
o A term is part of the deal (written or implied in the circumstance assessed by an ORP).
- a mistake of the term of a contract which the other party knows and snaps at which would be actionable, and
o The doctrine of unilateral mistake is only determinable is only applicable if the person who is mistaken is mistaken of the terms of the contract (what is actually being promised)
an assumption about what the person is getting that the other party snaps at which would not be actionable.

Question 4

Hartog v Colin & Shields, 1939 *USE THIS CASE OVER SMITH
(Example of Unilateral Test Being Applied/Mistake of Term v Assumption)

Answer 4

There is a duty to correct a mistake that is known to not be the real intention of the person making it. You cannot simply take advantage and ‘snap up’ the offer.
Based on…
- Industry norms.
- Market price.
- Prior language used in correspondence between the 2 parties.

Question 5

McMaster University v Wilchair Construction Ltd.

Answer 5

Because of the A/B relationship the bidder cannot argue a unilateral mistake of contract A – but can argue the mistake was to render the bid non-compliant. If it was a non-compliant bid, then there is no contract A and the bidder can get their money back.

Question 6

R v Ron Engineering & Construction (Eastern) Ltd., 1981
(A vs B Mistakes)

Answer 6

Recall, in this case the SCC’s creation of the analytical two staged process of unilateral contract A and bilateral contract B, where a call for tenders is an offer of unilateral contract A, a submission of bids constitutes an acceptance of unilateral contract A, and coupled with offer for unilateral contract B.

• MAIN POINT #1
  o Because of the creation of this two staged analysis, if a tender submits a mistaken bid, he accepts unilateral contract A, and there is nothing to snap at if the bid is a mistake.
  o Example: you mistakenly underbid yourself as a tender, and you don’t want the owner to accept your unilateral contract A, then the tender cannot argue that there was a mistake of the term of a contract, because the bidder who submits a compliant tender is the accepter. There is nothing to snap at.
• Point #2:
  o there could still be a unilateral mistake arguing in relation to unilateral contract B:
  o When you submit your tenders, you are accepting unilateral contract A, but you are also simultaneously making an offer of bilateral contract B.
  o if you submitted that bid, and realize that you made a major mistake, then you should just notify the owner of the mistake immediately.
  o The owner would then not be able to select that bid, because if they did, the bidder could make an argument for unilateral mistake.