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MistakeMistakeA2 Contract Law
Andy Howells
1
Andy Howells www.loretolaw.blogspot.com www.law-exchange.co.uk
What is mistake?What is mistake?
Where a contract entered into under a false assumption
A genuine false assumption (unlike misrep)
If it is a fundamental mistake, it can render the contract void
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Categories of mistakeCategories of mistake
Common mistake – both parties are acting under the same false assumption
Mutual mistake – where the parties are at cross purposes (also known as “shared mistake)
Unilateral mistake – where only one party is mistaken and the other party knows it
Mistake over documents
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Common MistakeCommon Mistake
Where the parties are in agreement, but share the same false assumption
The contract is based on a false situationTwo main types:Where mistake over existence of subject
matterWhere mistake over quality of subject
matter
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Mistake over existenceMistake over existence
Contract is res extincta – note meaningCouturier v Hastie (1856)Galloway v Galloway (1914)Scott v Coulson (1903)Confirmed void by SGA
(1979) s6
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McRae v CommonwealthMcRae v CommonwealthDisposals Commission (1951)Disposals Commission (1951)
Here the courts decided that one party assured the other of the existence of the subject matter
The reef and oil tanker that C paid for salvage rights over did not exist!
C got damages rather than having the contract declared void
Is this case really that different from Couturier v Hastie?
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Links with frustrationLinks with frustration
This doctrine is closely linked to frustration – note explanation of this at bottom of p187 (Charman, 4th Ed)
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Mistake over titleMistake over title
Res sua (the thing is his own)Cooper v Phibbs (1867) – can’t buy
something you already own!Note use of equity here to achieve fair
outcome
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Mistake over quality Mistake over quality
If its just a bad bargain, contract will not be voidBell v Lever Bros (1923)Why did the HoL decide as they did?Note Lord Atkin’s comments – what are the court
looking for?Leaf v International
Galleries (1950) – do you think this case was decided correctly? Why/why not?
Associated Japanese Bank Ltd v Credit du Nord (1988) – note why this case was not res extincta
Note phrase used in William Sindall v Cambridgeshire County Coucil (1994)
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TASKTASK
If a person buys an apparently worthless stamp at a flea market and it turns out to be a valuable rarity, should they return it to the seller? Should this be the same if they pay a lot of money for an apparently rare stamp which turns out to be a copy?
Write 250 words in answer to thisNote the criteria set out in Great Peace
Shipping v Tsavliris Salvage (2002)
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Mutual MistakeMutual Mistake
Where the parties have different assumptions from the outset
Contract will be held void if there is total ambiguity e.g. Raffles v Wichelhaus (1864)
What happened in Wood v Scarth (1858), and why is this different?
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Unilateral Mistake: QualityUnilateral Mistake: Quality
Where one party contracts on the basis of a false assumption and the other party knows about it!
Mistake over quality of goods not enough to void contract – Smith v Hughes
But note Scriven v Hindley (1913) where buyer bought a fabric that he thought was worth a lot more than what he actually got!
If it’s obvious and fundamental – contract can be void e.g. Hartog v Colin and Shields (1939)
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Unilateral Mistake: identityUnilateral Mistake: identity
Where someone poses as someone else to make a sale
Note meaning of “inter absentes” and “inter praesentes”
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Unilateral mistake: identity (3)Unilateral mistake: identity (3)inter praesentesinter praesentes
Phillips v Brooks (1919)What happened?Why was the mistake
not enough to void the contract?
Ingram v Little (1961)What happened here?Why was it decided
differently to Brooks?
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Unilateral mistake: identity (2)Unilateral mistake: identity (2)inter absentesinter absentes
Cundy v Lindsay (1878)Note factsWhy is this an example of inter absentes?What was the outcome, and why?
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More on More on inter praesentesinter praesentes
Lewis v Averay (1971)What did Lord Denning decide, and why?In Shogun v Hodson
(2003), whydid the court decide differently?
Make a detailed note.
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Mistake over the lawMistake over the law
Used to be no defenceHowever law ever more complex – so now
if a contract is formed based on a mistaken understanding of the law it is no longer a true agreement
Kleinwort Benson v Lincoln CC (1999)Brennan v Bolt Burdon (2005)
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Mistake over documentsMistake over documents
If parties sign a document they are bound by it – L’Estrange v Graucob
Non est factum – what does it mean?Foster v Mackinnon (1869)Lloyds Bank v Waterhouse (1990)V limited use – note Saunders v Anglia
(1971) aka Gallie v Lee
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Mistake over documents (2): Mistake over documents (2): rectificationrectification
Rectification is a measure used by the courts to amend a contract so as to reflect the intention of the parties’ oral agreement more accurately
Clear evidence of the oral agreement is required
Joscelyne v Nissen (1970)
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The doctrine of mistakeThe doctrine of mistake
Still developingNot universally approved ofDo we really need it? Note arguments why
notSheik v Oschner (1957) – why is this a
good example?V little difference between frustration and
mistake other than timing – Amalgamated Investment and Property Co Ltd v John Walker and Sons Ltd (1976)
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