Mistake in contract law Corso di inglese giuridico (M-Z) Università degli Studi di Bari ‘Aldo Moro’

Definition In contract law a mistake is incorrect understanding by one or more parties of the contract It may be used as grounds to invalidate the agreement

Effects  The general rule is that where a mistake has been made by the parties and it is an operative mistake, at common law, the contract may be deemed void  Even if the contract is valid at common law, in equity the contract may be voidable on the ground of mistake.

Distinctions Common law has identified three different types of mistake in contract: 1.common mistake 2.mutual mistake 3.unilateral mistake

Common Mistake Occurs when both parties make the same error relating to a fundamental fact. (the parties appear to be in agreement, but have entered into the contract under the same misapprehension) Such mistakes render the contract ‘void ab initio’

Cases of common mistakes  RES EXTINCTA Mistake as to the existence of the subject matter Where the subject matter of the contract does not exist or ceases to exist, it may be void at common law. see Couturier v Hastie (1856) Galloway v Galloway (1914) see s. 6 of the Sale of Goods Act 1979 : Where there is a contract for the sale of specific goods, and the goods without the knowledge of the sellers have perished at the time when the contract was made, the contract is void.

Cases of common mistakes  RES SUA Where there is an agreement to transfer property from one person to another, but the buyer already owns the property and neither party is aware of this, the contract will be void at common law  MISTAKE AS TO THE POSSIBILITY OF PERFORMING THE CONTRACT Where the obligations under the contract are impossible to perform, the contract will be deemed void. See Sheik Bros Ltd v Ochsner, 1957

Cases of common mistakes  MISTAKE AS TO QUALITY General rule: a mere mistake about one quality of the subject matter doesn’t render the contract void. common mistake can only void a contract if the mistake of the subject-matter is sufficiently fundamental to render its identity different from what was contracted see Bell v. Lever Brothers Ltd : Mistake as to quality of the thing contracted for raises more difficult questions. In a case a mistake will not affect assent unless it is the mistake of both parties, and is as to the existence of some quality which makes the thing without the quality essentially different from the thing as it was believed to be.

Mutual Mistake Occurs when there is a misunderstanding between the parties as to each other’s intentions The parties are said to be at cross-purposes. A mutual mistake negates consent The contract is considered void Courts apply an objective test (see. Raffles v Wichelhaus,1864)

Unilateral Mistake Occurs where only one party is mistaken and the other party knows about it and takes advantage of the error. A unilateral mistake negates consent Renders the contract void

Cases of unilateral mistakes  Unilateral mistake as to the terms of the contract a unilateral mistake - related to the terms of the contract – renders the contract void when one party is aware of the mistake and takes advantage of the other party’s error. Compare: Hartog v Colin and Shields (1939) Smith v Hughes

Cases of unilateral mistakes  Unilateral mistake as to the identity Where a mistake as to the identity of the other party to the contract is made, the contract will be deemed void if the identity of that person is central to the contract

Distinction:  Contract made inter absentes Where the parties are not physically in each others presence, (eg. they are dealing by correspondence) and one party is mistaken as to the identity, not the attributes, of the other and intends instead to deal with some identifiable third party, and the other knows this, then the contract will be void for mistake. See:  Cundy v Lindsay, 1878

 Contract made inter praesentes Where the parties are face to face there is a presumption that the mistaken party intends to deal with the other person who is physically present and identifiable by sight and sound. For such a mistake to be an operative mistake and to make the agreement void the mistaken party must show that:  (i) they intended to deal with someone else;  (ii) the party they dealt with knew of this intention;  (iii) they regarded identity as of crucial importance; and  (iv) they took reasonable steps to check the identity of the other person

Compare the cases: - Phillips v Brooks [1919] 2 KB Ingram v Little [1961] I QB 31