Mistake (Outline)

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This article provides an extremely short outline of the law of Mistake. Due to the complexity of this area of the law, it is highly recommended that one reads the detailed explanation. This outline, however, seeks to provide a succinct account of when mistake should operate to alter a contract and what circumstances are necessary.

  • Common mistakes:
    • Existence of subject matter:
      • If both parties have equal knowledge = implication of condition precedent and then contract is void, parties restored.[1]
      • If one party has knowledge and the other doesn't = the party with the knowledge promises or guarantees the existence of the subject matter and will be in breach if it does not exist.[2]
    • Quality of subject matter:
      • In circumstances which mean that it is fundamentally or essentially different from what was contracted for, contract is void.[3]
    • Recording the agreement:
      • Contract is rectified if:[4]
        1. It is obvious that something intended by both parties has been omitted by a mistake; and
        2. There is proof that the contract does not embody the full intention of the parties, and that intention could be expressed in writing.
  • Unilateral mistakes:
    • Term or Identity:
    • Identity with third parties involved.
      • Same rule as above, but also relevant if:
        • Parties are not face to face - if false identity is made up, the contract stands. If it's someone else's, it is void.[6]
        • Parties are face to face - contract stands, no remedy.[7]
    • Mistakenly signed documents:
      • If the other party had acted in an unconscionable way, the contract is voidable. If it hasn't, two requirements are necessary:[8]
        1. The document must have been read without carelessness; and
        2. The document was thought to be a fundamentally different document to what it is.
        • Note: this usually only applies to illiterate or disabled people.
    • Mistake in recording the agreement:
      • Contract will be rectified if the other party knew of the other's mistake and didn't do anything to notify him that he is signing the agreement mistakenly.[9]

This article is a topic within the subject Contracts.

References

  1. McRae v Commonwealth Disposals Commission (1951) 84 CLR 377, 408-9
  2. McRae v Commonwealth Disposals Commission (1951) 84 CLR 377, 408-9
  3. Bell v Lever Brothers [1932] AC 161, 217; Great Peace Shipping v Tsavliris Salvage (International) [2003] QB 679
  4. Pukallus v Cameron (1982) 180 CLR 447, 452
  5. Taylor v Johnson (1983) 151 CLR 422, 432
  6. Shogun Finance Ltd v Hudson [2004] AC 919
  7. Lewis v Averay [1972] 1 QB 198, 207
  8. Petelin v Cullen (1975) 132 CLR 355, 359-60
  9. Leibler v Air New Zealand Ltd (No. 2) [1999] 1 VR 1, 14
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