If a contract has been made in mistake, what is the effect?
Void
What is an operative mistake?
A mistake which means that a contract never took legal effect
What are the three categories of mistake?
Common mistake
Mutual mistake
Unilateral mistake
When does a common mistake occur?
When both parties are labouring under the same misapprehension
What is the general rule regarding mistake re quality of goods?
The contract is not void; Even if it affects the utility / value of goods
How are the very small group of cases where mistake re quality would make the contract void judged?
Whether the subject matter is ‘essentially different’ - but this is a highly restrictive ground
What are the three circumstances where common mistake does not operate?
Mistake is not sufficiently fundamental
One party is at fault
The contract makes a provision for the issue
What is a mutual mistake?
Where both parties are mistaken, but about different things: e.g. they are essentially negotiating at cross purposes
When will a mutual mistake be found?
Court employs an objective test and decides whether a reasonable third party would believe the agreement to exist or not.
What is a unilateral mistake?
Where only one party is mistaken and the other party knows / is deemed to know of the mistake
What happens if there is a material mistake in expressing intention e.g. price?
No contract found - you can’t snap up an accidentally very good offer e.g. mistake in price at last hurdle of negotiating
When is non est factum binding? [mistake as to nature of document being signed]
Blindness, illiteracy or senility
Trick / fraudulent misrep [provided all reasonable precautions taken]
What is a unilateral mistake?
Where only one party is mistaken and the other party knows / is deemed to know of the mistake
When is a contract void for mistake if there has been a face to face interaction?
Only when the seller can establish that identity, not attributes, are of vital importance
Lewis v Averay - it was creditworthiness, not fact that they were pretending to be an actor.
Can goods be recovered if a contract is voidable for misrepresentation but not void for mistake?
As long as 3rd party does not know about / have reason to suspect that there has been deception, they have acquired good title
What happens to third party rights if the contract is void for mistake?
Contract is void from the outset; third party has no title and must return goods to duped seller despite their innocence in the matter
Can contracts be void for mistake in distance selling situations?
Yes - if there is mistaken identity. More likely if mistake of identity is that of an identifiable third party.
In which scenario is a contract more likely to be found void for mistake: face to face or distance selling?
Distance
How do courts now approach contracts which involve an illegal act or are contrary to public policy?
A discretionary approach applying principles of public policy and proportionality
What are the trio of conditions determining whether illegality will defeat a contract?
Consider underlying purpose of prohibition and whether it would be enhanced by denial of the claim
Any other public policy which would be impacted
Would it be proportionate?
Are damages available for mistaken identity?
No - contract can be declared void by the court
What effect does common mistake as to subject matter have on a contract?
Void, unless a contract impliedly or expressly allocated this risk
What effect does common mistake as to fact or quality fundamental to agreement have on a contract?
Void, but this is only for the most severe instances of mistake
What effect does mutual mistake as to the identity of subject matter have on a contract?
Void
