LA1106 2016 Final Exam

Question 3(c)
Legal issue is whether Nelly’s contract with the rogue may be voidable by unilateral mistake, forcing
Gullible Gallery to return her manuscript.

Regarding face-to-face transactions, there is a presumption that the mistaken party intended to deal
with the person physically in their presence – meaning her contract with ‘John’ is valid at common
law. This presumption may be rebutted rendering it void in equity, provided she can prove the offer
was intended only for a specific person and that person’s identity was of vital importance; she took
reasonable steps to ensure this was the specific person, and the person accepting the offer was
aware that she intended to deal with someone else.

Nelly clearly intended the manuscript to be sold to a person from the MM company, and that this
was of vital importance as she stated “it was essential that the manuscript be sold to MMMA as the
public should be able to see it”. However, the steps she took to ensure the specific person was the
person being dealt with were likely unreasonable, as she did not seek assurance of photo ID. It is
clear ‘John’ knew she intended to deal with a person from MMMA, however as she did not take
reasonable steps she will unlikely have the contract set aside through unilateral mistake.

Contract may be void in equity, provided it is voided before an innocent third party has in good faith
acquired title to the goods (Louis v Avery). On the facts here, it seems the rights have transferred to
an innocent third party – GG, thus cannot be voidable in equity. If GG have colluded with ‘John’ or
MMMA, however, the manuscript would not have been acquired in good faith thus Nelly will have a
case in equity.

The contract with ‘John’ is valid and unable to be void at common law due to no significant measure
being taken to check the identity of the person, and is unable to be voided in equity due to rights
being transferred to a third party – GG. However, if Nelly can prove that GG have not acquired the
rights in good faith, she may have a case in equity.