Mistake

Question 1

What is an operative mistake?

Answer 1

• Mistake so fundamental that it will render the contract void.
• Deemed null as if it never existed.

Mistake of fact that:

1. prevents formation of the contract parties did not actually reach an agreement bc of mistake, or:
2. makes the contract something other than intended

Question 2

Are there damages available for mistake?

Answer 2

no

Question 3

When must a mistake exist in order to void the contract?

Answer 3

At the time of the contact being formed

Question 4

What are the 3 categories of mistake?

Answer 4

1. common mistake

both parties make the same mistake

2. Mutual mistake

both parties appear to agree but are agreeing on different things.

3. unilateral mistake

one party is mistaken -> other party knows this and takes advantage

Question 5

Common mistake:

What is meant by ‘res extincta’?

Answer 5

subject matter of the contract is not in existence at the time the contract is being formed

Question 6

Common mistake:

What is meant by ‘res sua’?

Answer 6

mistake as to ownership

matter of the contract is actually owned by someone else and parties do not realise this

Question 7

Can there be common mistake as to quality/ type of product?

Answer 7

no -> not an operative mistake

Question 8

Mutual mistake:

What is the test to determine if there is an agreement between the parties or an operative mistake?

Answer 8

reasonable man test

would a reasonable man believe the subject matter or terms to be either what Party A or B thought it would be?

if yes = contract found on these terms
if no = operative mutual mistake

Question 9

What are 3 types of unilateral mistake?

Answer 9

Unilateral mistake as to:

1. terms of the contract
2. nature of document signed
3. identity of person contracted with

Question 10

In order for there to be a unilateral mistake as to the nature of document signed - what 3 things must be shown?

Answer 10

1. fundamental difference between what the party thought he was signing and what they were actually signing
2. trick or fraud, but;
3. signatory must have still taken reasonable care to make any checks before signing

(no operative mistake if the unilateral mistake is a result of C’s own carelessness)

Question 11

If there is a unilateral mistake as to the identity of the person contracted with, what rule applies if this was a face-to-face transaction?

Answer 11

presumption = no operative mistake

only rebuttable if identity is fundamental to the contract

(credit worthiness does not count)

e.g. X sells lion to Y who they thought was a circus owner. Y runs off. X would have sold lion anyways, regardless of whether Y was a circus owner or not -> contract not void

Question 12

• Contract between Party A and B
• B lies about their identity to party A
• A sells to B
• B sells to C
• A wants property back.

Can A get this property back?

Answer 12

if mistake = contract is void and A can get item back and C can sue B for breach (SoGA implied term as to ownership)

misrepresentation = A can only rescind -> but if C is a 3rd party bona fide purchaser rescission is barred.A can sue B for damages for fraudulent misrepresentation/ breach of contract

note: if face-to-face -> more likely to be a misrepresentation; if long distance -> more likely to be a mistake