Topic 3: Mistake Flashcards
(41 cards)
What is a vitiating factor?
A factor that affects the validity of a contract
What are the two possible effects when a vitiating factor is established?
Void contract
Voidable contract
What is the difference between a void and a voidable contract?
A void contract is as though it never existed
A voidable contract exists but is ‘damaged’; it can be rescinded on the victim establishing misrepresentation or duress
Define ‘mistake’
When a contract is entered into on the basis of a misunderstanding or error on the part of one or both of the contracting parties
What are the three types of mistake?
Communication mistake
Mistake as to the identity of the contracting party
Common mistake of fundamental fact
What is a communication mistake?
An issue of whether there is ‘consensus ad idem’
What do the courts look at when trying to establish a communication mistake?
What case established this?
What the external circumstances would have indicated to the objective bystander
Smith v Hughes (1871)
Which case demonstrates the ‘external bystander’ test?
Centrovincial Estates plc v Merchant Investors Assurance Co Ltd (1983)
Briefly outline the case Centrovincial Estates plc v Merchant Investors Assurance Co Ltd (1983)
There was a contract for a lease that provided that the rent should be set at the current market rental value of the premises
The landlord wrote to the defendants inviting them to agree that the current rental value was £65,000
The defendants replied by letter to agree, but the claimants then wrote back to inform them of an error – the figure they had intended to propose was £126,000
Held: the reasonable objective observer would have assumed the price stated was correct and there was no evidence that the defendants knew or could reasonable have known of the mistake
What are the three instances in which the objective test will not apply to a case of communication mistake?
(a) One contracting party is aware or ought reasonably to have been aware that the other party has made a mistake
(b) The seller causes the buyer to make a mistake
(c) There is latent ambiguity, so the court is unable to apply the objective test
What is the case for unilateral mistake?
Hartog v Colin & Shields (1939)
What will the courts look at if one party is aware or ought reasonably to have been aware that the other party has made a mistake? (Communication mistakes)
What was actually in the minds of the parties
What case governs when a seller causes a buyer to make a communication mistake?
Scriven Brothers & Co v Hindley & Co (1913)
Briefly outline Scriven Brothers & Co v Hindley & Co (1913)
Seller shipped some hemp (more valuable) and tow but negligently put them in crates with the same shipping mark
At auction, the buyer thought he was bidding for hemp but it was tow
The seller had caused the bidder’s mistake so there was no objective agreement
What case applies to latent ambiguity?
Raffles v Wichelhaus (The Peerless) (1864)
Briefly outline Raffles v Wichelhaus (The Peerless) (1864)
Two ships of the same name, docking in October and December
One party assumed the October date; the other, December
Why is The Peerless a rare case?
The courts will often be able to find grounds to adopt one of the views of the parties
Briefly outline the principles of a mistake as to the identity of the contracting party
A rogue misrepresents themselves as someone else and cons the seller into selling him something
The rogue then sells the goods to an innocent third party, from whom the innocent seller seeks to recover the goods, arguing that their contract with the rogue was voided for mistakes
Why is mistake pleased in the cases of a rogue misrepresenting themselves?
You cannot give what you do not have (memo dat quod non habet)
If the original contract to sell the goods to the rogue is void for mistake, the contract is treated as having never existed, so the rogue never obtained ownership of the goods
Therefore, when he purported to sell them to a third party, they never obtained ownership of the goods
Therefore, the original owner can claim the goods from the third party, who may be in possession of the goods but will have no title
If the original contract with the rogue is not void for mistake, then he obtained ownership of the goods and could validly transfer them to a third party, from whom the innocent seller will not be able to claim the goods
What is the presumption when a contract is made with the rogue face-to-face?
That the innocent seller intended to deal with the person standing in front of them, regardless of who they pretended to be
When a contract is made with the rogue face-to-face, what is the legal effect?
The contract is not void for mistake, so the title of the goods passes to the rogue
How can the presumption be rebutted when a contract is made with a rogue face-to-face?
If, when the offer was made, the innocent seller regarded the offeree as a matter of vital importance, not just his creditworthiness or attributes (Lewis v Averay (1972))
What three cases relate to when a contract is made with a rogue face-to-face?
Phillips v Brooks Ltd (1919)
Ingram v Little (1961)
Lewis v Averay (1972)
Briefly outline the facts of Phillips v Brooks Ltd (1919)
Rogue went into a jewellers (Phillips) posing as Sir George Bullough from St James’ Square. He selected a ring and paid by cheque
The assistant checked Sir George’s address and let the rogue take the ring, who then pawned it to Brooks Ltd
Held: the contract was not void because Phillips intended to contract with the person standing in front of him, and not Sir George himself
This is because a connection can be made by the seller to someone they have seen in front of them
