Mistake

Q: What is mistake in contract law?

A: Mistake is a vitiating factor in contract law, often argued when breach of contract or misrepresentation cannot be claimed. It is important for rendering the contract void.

Q: What must be established to claim mistake in a contract?

A: There must be a fact or event that existed or occurred before the formation of the contract that constitutes an operative mistake.

Q: What does an operative mistake do to a contract?

A: An operative mistake renders the contract void ab initio (from the start), meaning the contract is void from its formation.

Q: What are the three categories of mistake in contract law?

A: The three categories of mistake are:

1. Mutual mistake

2. Common mistake

3. Unilateral mistake

Q: What is a mutual mistake in contract law?

A: A mutual mistake occurs when both parties misunderstand each other’s intentions and are at cross-purposes, though they do not make the same mistake.

Q: What is the significance of the case Raffles v Wichelhaus (1864)?

A: In this case, the contract was void due to mutual mistake (defendant agreed to buy a cargo of cotton from the claimant). The buyer and seller were referring to different ships named Peerless, and the agreement was ambiguous, leading to a misunderstanding of the terms. The offer and acceptance did not coincide.

Q: What is a common mistake in contract law?

A: A common mistake occurs when both parties make the same false and fundamental assumption about the contract, and one party seeks to nullify the contract due to this shared mistake.

Q: What is a common mistake related to the existence of the subject matter?

A: A common mistake arises when both parties are unaware that the subject matter of the contract does not exist or has ceased to exist by the time the contract is made.

Q: What happened in the case of Couturier v Hastie (1856)?

A: The contract was for the sale of corn thought to be on a ship. However, the corn had been sold in Tunis before the contract was made. The contract was deemed void due to a common mistake as the subject matter no longer existed.

Q: How does s.6 SGA 1979 relate to common mistake?

A: s.6 SGA 1979 encapsulates the rule for common mistake, stating that it applies only if there is no other provision covering the situation where the subject matter of the contract has ceased to exist.

Q: What are the three other possibilities to consider when dealing with mistake in contract law?

A: The three possibilities are:

1. Term/Warranty

2. Assumption of risk

3. Misrepresentation

Q: What does Term/Warranty refer to in the context of contract law?

A: A Term/Warranty refers to a promise made by one party, either expressly or impliedly, that the subject matter of the contract exists. If a party promises the existence of something and it turns out to be false, it may lead to a breach of contract.

Q: What is the significance of McRae v Commonwealth Disposals Commission (1951) in relation to Term/Warranty?

A: In McRae v Commonwealth Disposals Commission (1951), the High Court of Australia ruled that the Commission had implicitly promised that a wrecked vessel existed at a specific location. This was not a case of common mistake, but rather a breach of contract due to an implied term, making the Commission liable for damages.

Q: What is Assumption of Risk in contract law?

A: Assumption of risk occurs when one party has accepted the risk that the subject matter of the contract may not exist. If the subject matter does not exist, the party who assumed the risk is responsible for any losses and cannot claim a mistake.

Q: How is Assumption of Risk determined in a contract?

A: Assumption of risk is determined by looking at the construction of the contract. It can be explicitly stated as an express term or implied based on the context of the agreement, as seen in Great Peace Shipping Ltd v Tsavliris (International) Ltd [2002].

Q: What is Misrepresentation in contract law?

A: Misrepresentation occurs when one party makes a false statement about the subject matter of the contract that induces the other party to enter into the contract. If the statement is not a term of the contract, it may lead to an actionable misrepresentation claim.

Q: What is a common mistake in contract law?

A: A common mistake occurs when both parties are mistaken about a fundamental fact regarding the subject matter of the contract. The thing contracted for exists, but the parties are mistaken about some essential characteristic, such as its quality or nature.

Q: What is the difficulty when a common mistake is about the quality of the subject matter in a contract?

A: The difficulty arises because the contract is not about the non-existence of the subject matter, but rather a mistake about a fundamental aspect or quality of the subject matter. This often does not make the contract void unless the mistake is significant enough.

Q: What happened in Leaf v International Galleries [1950] in relation to a common mistake about quality?

A: In Leaf v International Galleries [1950], the claimant bought a painting believed to be by Constable. After five years, it was discovered that it wasn’t by Constable. The court held that the mistake was about the quality of the painting, not its subject matter, and thus the claim for rescission failed.

Q: What was the significance of Bell v Lever Bros Ltd [1932] regarding a common mistake about quality?

A: In Bell v Lever Bros Ltd [1932], Lever Bros. paid £50,000 compensation to terminate the employment contracts of directors. The company later realized the directors had breached their contracts. The court ruled that the mistake was about the level of compensation, not the subject matter of the contract, so the contract was not void for common mistake.

Q: What is the difference between substance and quality in contract law?

A: Substance refers to the essential nature of the subject matter, while quality refers to characteristics or features. A mistake as to substance can render the contract void, but a mistake as to quality generally does not.

Q: How did Lord Atkin describe a mistake as to quality in contract law?

A: Lord Atkin explained that a mistake as to quality does not affect assent unless it is a mutual mistake about the existence of a quality that makes the thing essentially different from what was believed.

Q: What happened in Nicholson & Venn v Smith Marriott (1947) regarding a mistake as to quality?

A: In Nicholson & Venn v Smith Marriott (1947), a mistake about the authenticity of napkins believed to have belonged to Charles I was considered significant enough to possibly render the contract void. However, the case was decided on breach of contract, and the mistake point was obiter.

Q: What did Steyn J suggest in Associated Japanese Bank (International) Ltd v Credit du Nord SA [1989] about the distinction between substance and quality?

A: Steyn J suggested that the distinction between substance and quality was no longer useful and that the traditional civilian doctrine should not be applied.

Q: What was the outcome of Great Peace Shipping Ltd v Tsavliris (International) Ltd [2002] regarding a common mistake about quality?

A: In Great Peace Shipping Ltd v Tsavliris (International) Ltd [2002], the court ruled that the mistake about the distance between ships did not render the contract void. The mistake did not make the services fundamentally different from what was agreed, and the contract could still be performed.

Q: What does the case of Brennan v Bolt Burden [2004] teach about common mistake?

A: Brennan v Bolt Burden [2004] highlighted the need to carefully determine the specific obligations agreed upon by the parties. If the contract becomes impossible to perform due to a common mistake, it must be due to the impossibility of performing the agreed terms.

Q: What is unilateral mistake in contract law?

A: A unilateral mistake occurs when one party makes a mistake about a key aspect of the contract, and the other party is aware of the mistake or should be aware of it.

Q: What must happen for a unilateral mistake to be valid/operative under common law?

A: The mistake must be about a fundamental aspect of the contract, not a minor error, and the other party must be aware or should have been aware of it.

Q: What is unilateral mistake as to identity?

A: If someone is mistaken about the identity of the other party in a contract due to fraud, there may be no contract. If there is a contract, ownership of goods may not pass to the fraudster, but an innocent purchaser may gain title if the contract is voidable, not void.

Q: Face-to-face contracts: What happened in Phillips v Brooks Ltd [1919]?

A: The claimant sold a ring to a rogue who pretended to be someone else. The court ruled that the contract was not void for mistake as identity was not crucial to the claimant’s intent. The ring was taken by the rogue and sold, and the innocent buyer kept it.

Q: What was decided in Lewis v Averay [1972]?

A: The court ruled the contract was voidable for fraud, but not void for mistake. The rogue pretended to be a famous actor when buying a car, and the claimant was not only dealing with the identity of the actor.

Q: How did Ingram v Little [1961] differ in terms of identity?

A: The court ruled the contract void for mistake as identity was crucial in this case, since the claimants only intended to sell the car to a person who matched the name PGM Hutchinson.

Q: Parties not in each other’s presence: What happened in Cundy v Lindsay (1878)?

A: The rogue bought goods using a false name and address, and the court held that the contract was void for unilateral mistake as the identity was crucial to the seller’s intent.

Q: Written or face-to-face: What was the outcome of Shogun Finance Ltd v Hudson [2003]?

A: The court ruled the contract void for unilateral mistake. The claimant intended to deal with the person on the hire purchase document, not the rogue, and the innocent purchaser did not gain title to the car.

Q: What does Hartog v Colin & Shields [1939] show about unilateral mistake?

A: The case involved a fundamental mistake about the price of goods. The court ruled the contract void for unilateral mistake because the claimants must have known the price was a mistake. The burden of proof lies on the party alleging the unilateral mistake.

Q: What did Denning LJ state in Solle v Butcher (1950) regarding equity and mistake?

A: Denning LJ suggested that equity might set aside a contract even if there was no mistake at common law. However, Great Peace clarified that equity follows the law, meaning no remedy is available unless mistake is established at common law.

Q: What are the two types of documentary mistake?

A:

1. Induced Mistake: A person is induced by a false statement to sign a document containing a contract that is fundamentally different from the one intended.

2. Recording Mistake: The parties agree on terms, but due to a mistake, the written document records the terms incorrectly, leading to a request for rectification.

Q: What is the general rule regarding signing documents? + case

A: People are bound by their signature to documents, whether or not they have read or understood them (L’Estrange v Graucob (1934)).

Q: When can the plea of non est factum (not my deed) be available?

A: The plea of non est factum may be available if:

1. There is a fundamental or radical difference between the document actually signed and what the signer believed it to be.

2. The signer was not negligent (careless) in signing the document.

Q: What restrictions are placed on the right to raise the plea of non est factum?

A:

1. There must be a fundamental or radical difference between the document signed and what the signer believed it to be.

2. The signer must not have been negligent in signing the document.

Q: What was the decision in Saunders v Anglia Building Society (1971) for non est factum?

A: The plea of non est factum was denied because:

1. The transaction of her house to her nephew was not fundamentally different from what the widow intended.

2. She was careless in signing the document as she lost her spectacles and signed it unread.

Q: When may the plea of non est factum be available?

A: In the absence of factors that would otherwise invalidate consent, as explained in Muskham Finance Ltd v Howard (1963).

Q: What is rectification?

A: Rectification is a remedy where the court can correct a written document that does not reflect the true agreement due to a mistake and may order specific performance based on the rectified contract.

Q: What is the exception to the parole evidence rule in relation to rectification?

A: Rectification is an exception to the parole evidence rule, meaning oral evidence can be used to show that the written document is in error.

Q: What was the decision in Craddock Brothers v Hunt (1923)?

A: The conveyance was rectified because the written contract mistakenly included an adjoining yard that had been excluded from the sale by the parties. This would bring it into line with the parties’ oral agreement.

Q: Under what circumstances will rectification not be available?

A: Rectification will not be available if there is confusion about what was agreed or if the written document correctly reflects the agreement but contains a mistake about the transaction itself.

Q: What was the decision in Frederick E Rose (London) Ltd v William H. Pim & Co. Ltd. (1953)?

A: Rectification was refused because the written contract correctly recorded the agreement; the mistake was only in the parties’ minds regarding the type of horsebeans.

Q: When will the court refuse rectification based on equity?

A: The court will refuse rectification if third parties have acquired rights based on the written contract, and it is not equitable to grant the remedy.

Q: How did Great Peace influence the case of Kyle Bay v Underwriters (2007)?

A: Great Peace was affirmed by Kyle Bay v Underwriters (2007), confirming that equity follows the law in relation to mistakes.