Tutorial 3: Week 3 Consider these questions. Please come prepared for the tutorial.

1. What is the effect of an operative mistake?

The effect of an operative mistake is that the agreement is void. A void agreement is not
enforceable by law.

2. What is the basis for rendering agreements tainted by an operative mistake void?

The basis for rendering agreements void under section 21 and thus unenforceable is that there
has been no free consent between the parties.

3. What are the requirements for a mistake under s 21 CA1950?

- It is made by both parties

- As a matter of fact and

- The said fact is essential to the agreement

4. State briefly the facts in Ho Weng On v Bindev Sdn Bhd [2007]. What did the court
hold?

In this case, the plaintiffs purchased from the defendant developer one unit of a double-story
semi-detached house to be built in a project at Bukit Istana, Kuantan. Unknown to the
defendant, its agent or employees had a year earlier, sold the said unit to another party. The
plaintiffs sued the defendant for specific performance of the contract. The defendant
contended that the agreement was void on the ground of common mistake as both parties
were mistaken as to the availability of the said property for sale at the time of the contract.
The High Court rejected the said argument. The court held that only the defendant made the
mistake, the plaintiffs did not. The court held that the mistake was clearly the direct result of
the defendant’s own wrongdoing. The defendant alone was mistaken, not the plaintiffs. Thus,
the agreement was a valid contract and not void by mistake. The court awarded the plaintiffs
RM4000 as damages, the difference between the current market value of the property and the
contract price.

5. Section 21 states “Where both the parties to an agreement are under a mistake as to a
matter of fact essential to the agreement, the agreement is void.” Under what
circumstances will the law regard a fact as essential to the agreement?
Only a mistake as to the existence of the subject matter of the agreement is a matter of fact
essential to the agreement under section 21. However, in Sheikh Bros Ltd v Ochsner, the
Privy Council extended the scope of the mistake under section 21 to cover the circumstance
where both parties made a mistake as to the possibility of performing the agreement.

6. What does the Explanation to s 21 states? Explain the Explanation.

The Explanation to section 21 states an erroneous opinion as to the value of the thing which
forms the subject matter of the agreement is not to be deemed a mistake as to a matter of fact.

7. In a situation as per question 6, what are the two questions that arise?

8. Does a unilateral mistake render a contract void?

Section 22 of the Act provides a contract is not voidable because it was caused by a mistake
as to any law in force in Malaysia, but a mistake as to law not in force in Malaysia has the

9. Does a mistake as to law render a contract void?

10. Irene inherited certain items from her uncle Lestrade, and among the articles is a
rare figurine believed to have been discovered by the archaeologist Dr. Watson from the
Amazon. The figurine had been housed in her uncle’s mansion in Peru but was being
shipped, along with the other items, to Malaysia. She told her friend Sherlock about this
over lunch one weekend in May and he asked if she was interested to sell it, as he
collects South American relics. They negotiated a price and eventually came to an
agreement. He paid her the money (RM15,000) and left.

In June, Sherlock visited his cousin Moriarty at his home and as he walked across the
garden, spotted a beautiful abstract marble sculpture. He recognised it as a ‘Farouq’
(i.e. one created by the famous local artist Farouq). As he was about to leave, Sherlock
asked, “Mo, I would like to buy your garden sculpture. Is it for sale?” Moriarty
answered, “As a matter of fact, it is. I’ll let you have it for RM20,000.” They shook
hands on the deal. Sherlock was to collect the sculpture and make payment during the
weekend.

On Saturday, Sherlock returned to Moriarty’s to collect the sculpture. After the two had
placed it in Sherlock’s car, Moriarty mentioned that it was a ‘Shang’. Shocked, Sherlock
told his cousin that he did not want it because he had thought that it was a ‘Farouq’. He
unloaded it, but Moriarty insisted on being paid.
That night, Sherlock received a call from Irene who informed him that she had just
been informed that at the end of April the ship which had been carrying her inheritance
from Peru sank in the middle of the ocean and everything was lost (although the crew
was saved).

Advise the parties.