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Introduction
Mistakes are categorized as a Mistake of Fact, Mistake of
Law, or mutual mistake. A mistake of fact occurs when a person
believes that acondition or event exists when it does not. A mistak
e of law is made by a person who has knowledge of the correct fa
cts but is wrong aboutthe legal consequences of an act or event.
A mutual mistake arises when two or more parties have a shared
intention that has been induced by a common misbelief.
Types of mistake
1. Common mistake
2. Mutual mistake
3. Unilateral mistakes
Common Mistake
Where a common mistake occurs, the parties appear to be in
agreement, but have entered into the contract under the same
misapprehension. Such mistakes are fundamental to the contract,
render the contract void ab initio (void from the very beginning).
In the case of Bell v Lever Bros (1932), it was held that for a
Mutual Mistake
Where a mutual mistake occurs, there is a misunderstanding
between the parties as to each others intentions and they are
said to be at cross-purposes. A mutual mistake negates consent
and therefore no agreement is said to have been formed at all.
(i) Mutual mistake as to the identity of the subject matter
Where there is ambiguity as to the understanding of the
agreement, the contract will be deemed void. In determining this,
the court applied an objective test asking whether
a reasonable third party would take the agreement to mean what
one party thought it meant, or what the other party thought it
meant. In the case of Raffles v Wichelhaus (1864), the court held
that there was no agreement as the parties were thinking of two
different ships when they entered into the agreement and it was
therefore too ambiguous to enforce. This can be contrasted with
the case of Smith v Hughes (1971) where the mistake related to
the quality, not the identity of the subject matter and the court held
that the agreement was valid.
(ii) Mutual mistake in equity
Unilateral Mistake
A unilateral mistake is where only one party is mistaken and the
other party knows about it and takes advantage of the error. A
unilateral mistake also negates consent and the existence of an
agreement.
(i) Unilateral mistake as to the terms of the contract
For a unilateral mistake to be operative, it must relate to the terms
of the contract. This type of mistake occurs where one party is
aware of the mistake and takes advantage of the other partys
error. Such a mistake will render the contract void.
In the case of Hartog v Colin and Shields (1939) the seller had
made a mistake as to the price of goods and it was held that the
buyer must have realised the mistake and as it concerned a term
of the contract, the contract was held to be void.
A unilateral mistake as to the quality of the subject matter will not
render the contract void. In Smith v Hughes the contract was for
the sale of oats. The buyer believed they were old oats, but they
were not. However, the contract was still held to be valid as the
sale of old oats was not a term of the contract.
Mistake as to 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. However, where the parties
negotiate in person, there is a presumption that there is an
intention to do business with the person in their presence, in
which case it is unlikely that a contract will be void, as is
demonstrated by the case of Phillips v Brooks (1919).
The contract was held to be valid where a jeweller sold goods to
someone who purported to be someone else as he had intended
to do business with that particular person, even though he was
not who the jeweller thought he was.
Remedies
Depending on the type of mistake made and whether it is
considered fundamental, a contract may be deemed void. Even
where a contract is deemed valid, or indeed void at common law,