What is an operative mistake?
- Mistake so fundamental that it will render the contract void.
- Deemed null as if it never existed.
Mistake of fact that:
- prevents formation of the contract parties did not actually reach an agreement bc of mistake, or:
- makes the contract something other than intended
Are there damages available for mistake?
no
When must a mistake exist in order to void the contract?
At the time of the contact being formed
What are the 3 categories of mistake?
- common mistake
both parties make the same mistake
- Mutual mistake
both parties appear to agree but are agreeing on different things.
- unilateral mistake
one party is mistaken -> other party knows this and takes advantage
Common mistake:
What is meant by ‘res extincta’?
subject matter of the contract is not in existence at the time the contract is being formed
Common mistake:
What is meant by ‘res sua’?
mistake as to ownership
matter of the contract is actually owned by someone else and parties do not realise this
Can there be common mistake as to quality/ type of product?
no -> not an operative mistake
Mutual mistake:
What is the test to determine if there is an agreement between the parties or an operative mistake?
reasonable man test
would a reasonable man believe the subject matter or terms to be either what Party A or B thought it would be?
if yes = contract found on these terms
if no = operative mutual mistake
What are 3 types of unilateral mistake?
Unilateral mistake as to:
- terms of the contract
- nature of document signed
- identity of person contracted with
In order for there to be a unilateral mistake as to the nature of document signed - what 3 things must be shown?
- fundamental difference between what the party thought he was signing and what they were actually signing
- trick or fraud, but;
- signatory must have still taken reasonable care to make any checks before signing
(no operative mistake if the unilateral mistake is a result of C’s own carelessness)
If there is a unilateral mistake as to the identity of the person contracted with, what rule applies if this was a face-to-face transaction?
presumption = no operative mistake
only rebuttable if identity is fundamental to the contract
(credit worthiness does not count)
e.g. X sells lion to Y who they thought was a circus owner. Y runs off. X would have sold lion anyways, regardless of whether Y was a circus owner or not -> contract not void
- Contract between Party A and B
- B lies about their identity to party A
- A sells to B
- B sells to C
- A wants property back.
Can A get this property back?
if mistake = contract is void and A can get item back and C can sue B for breach (SoGA implied term as to ownership)
misrepresentation = A can only rescind -> but if C is a 3rd party bona fide purchaser rescission is barred.A can sue B for damages for fraudulent misrepresentation/ breach of contract
note: if face-to-face -> more likely to be a misrepresentation; if long distance -> more likely to be a mistake
