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Week 1 - Mistake (Common mistake where both parties made the same…

- - - - McRae v Commonwealth disposals commissions (1951) 84 CLR 377
        The D but out to tender for which the P was successful to remove a oil tanker from a reef called Jourmand Reef near PNG. It was later discovered that there was no ship nor was there any reef by this name. The HC considered whether this was common mistake as both sides had assumed there was a place called Jourmand Reef, and that there was a tanker sunk on the reef. However the HC ruled that this was no a case of common mistake but the P had acted in reliance upon the D statement. As such there was really only one mistake that of the D, as it promised something that it could not deliver.
        this decision makes sense if the rule of the more recent HC decision above are applied.
      - Leaf v International Galleries [1950] 2 KB 86
        The gallery purchased a painting, believing it to be a famous artist when in fact the art work was a forgery. The seller provided the painting but it was nowhere near the value of the original. The question was whether this was a mutual mistake, for which the court found it was not, because the seller had contract to sell a painting of a famous artist, the seller had failed to provide a painting by a famous artist. This was considered to be a breach rather than a mistake.
    - - in the rare situation where a mistake is made by both parties about the ownership of the goods in question. If the seller does not actually own the item being sold the principle nemo dat quod non habet (you cannot give what you do not have) will apply.
        There is also the situation where someone is sold something that they already own (Bell v Lever Bros [1932] AC 16)
        
        Bell v Lever Bros [1932] AC 16
        in this case is was remarked in orbiter that this would be a case of common mistake and would make the contact void.
  - - - equity can set aside the contract on whatever terms are considered appropriate. For this to occur there must be first a common mistake, and the party having the contract set aside must not be at fault in relation to the mistake.
        
        Solle v Butcher [1950] KB 671
        both parties made a mistake about whether a certain rental capping legislation applied to a flat. They later discovered that the cap should have applied and the renter therefore had been paying too much rent. The court found that the P had in fact served as an advisor in relation to the rental decision, as a result the P (renter) was at fault in relation to the mistake and it would have been inequitable to allow them to benefit from the mistake. Instead the court rescinded the contract and ordered a new contract be set place
    - - this can occur in circumstances where is may be possible to undo the mistake and allow the contract to carry on. The effect of this would be to change the contract to allow it to function properly so it reflects the actual intention of the parties.
        
        Slee v Warke (1949) 86 CLR 271
        the drafter of the contract used the words may instead of shall which would have been more appropriate. In this case the court did not need to determine the appropriate use of the words may or shall as the case was decided on other grounds, however the court made it clear that the power of rectification was within its power.
- - - - concept called non est factum, which translates as “this was not my deed.”
        therefor how can one say that they were ever ad idem, and if they are not ad idem then on what basis is there any agreement at all.
        
        Petelin v Cullen (1975) 132 CLR 355
        the P was illiterate in english and very poorly proficient even in spoken english, He extended an option to the D for the purchase of a parcel of land bit the option had expired and Cullen wrote via an agent seeking further option and paying $50 for the option. The P was told by the D agent that he must sign the document, the P believing it to be a receipt signed the document, believing it not to be a contract. The P later refused to sell the land. The HC found that the option was not binding upon the P, but in doing so set out three rules that must be met
        
        the person must believe that the document is radically different from what it actually is. As a result the person who signed the document was even aware that the document was capable of creating obligations the doctrine of non est factum will not apply
        
        if the other party is innocent the person making the mistake must show that their failure to read and understand the contract was not due to carelessness. Note, however that if the other party is not innocent (as an example they have misrepresented the nature of the document) then this final criterion will not apply
        
        The person who claims that they have made a mistake must be either unable to read or must rely on another person to explain the document to them, or alternatively for some other reason they must be unable to understand the nature of the particular document
    - - Taylor v Johnson (1983) 151 CLR 422
        In this case, Mrs Johnson gave to Mr Taylor an option to purchase a parcel of land for a specified price. Mrs Johnson believed that the sale price was to be $15,000 per acre. In fact, she was mistaken and the option specified the sale price to be $15,000 total. When this came to light, Mrs Johnson refused to go through with the sale, and Mr Taylor sued to force her to perform the contract.
        
        Based on this case the HC made a number of important statements about how these unilateral mistakes should be treated by the court
        
        The test in an objective test (not subjective).
        
        The fact that one party feels they made a mistake about the contract is not enough to prove the mistake. The court will apply a reasonable pe3rson test to determine if a mistake has been made
        
        Equity would rescind (set aside) the contract in this situation because the D had taken deliberate steps to prevent the P from becoming aware of her mistake.
        
        As a result equity will intervene as to the subject matter of the contract when the following three conditions hold true
        
        The other party must know of the mistaken party's mistake
        
        The other party must take some steps to prevent the mistaken party from learning of their mistake
        
        The mistrake must relate to a fundamental matter of the contract
        
        The other parties conduct must amount to more than simply failing to correct the other party's mistake: it must amount to an unconscionable effort to prevent the other party from becoming aware of the mistake
        
        also see of XCB Pty Ltd v Creative Brands Pty Ltd [2005] VSC 424
    - - occurs if the intended party is not is not the one with who the contract is made. Subdivided into two catergories
        
        Parties not face to face
        if a mistake is made about the identity of the other party and the contact is not made face to face then it is typically void
        
        Cundy v Lindsay (1878) 3 App Cas 459
        In this case a man named Blenkarn sent a letter to Lindsay offering to buy a consignment of more than 3000 handkerchiefs for a specified price. He wrote his letter in such a way as to make it appear that he was in fact writing on behalf of a company called “Blenkiron & Co” which had a very sound business reputation. In fact, Blenkarn then sold the handkerchiefs to Cundy and disappeared, refusing to pay Lindsay. Lindsay sued Cundy in the tort of conversion, essentially on the basis that Cundy had received what amounted to stolen goods.
        The court found in favour of Lindsay. The reasoning was that Lindsay had never intended to form any contract with Blenkarn. As a result, Lindsay and Blenkarn were never ad idem and so no effective contract for sale had ever been made. The handkerchiefs had never properly passed to Blenkarn, so he could not pass title in them to Cundy.
        
        The result of this is that if one party makes mistake as to the identity of the other party, and the two are not face-to-face at the time, the contract is likely to be void.
        
        Parties face to face (inter praesentes) (means between to parties that are present)
        contract can be voidable but only before a third party who has in good faith acquired the goods
        
        Lewis v Averay [1972] 1 QB 198.
        In this case a contract was formed for the sale of a car. The purchaser gave his name as “Richard Greene”, which was the name of a well-known actor who was famous for playing the role of Robin Hood. To support this identity, he presented a television studio pass bearing his name and an official-looking stamp. The seller accepted his identity and took a cheque for the car. The cheque subsequently bounced, and the seller turned out not to have been the actor after all. The court found that there was no evidence to support a unilateral mistake. Although the presumption is that each party intended to make a contract with the person standing opposite them, which in this situation was the person who was standing there and gave him the cheque. Although this could have been rebutted by showing actual intention to undertaken a contract with a specific person, this was not done so in this case (note this example does not considered other issue like misrepresentation and misleading a deceptive conduct)
        
        see also Phillips v Brookes and Ingrahm v Little, for discussion on who has title and as to whether the contract if void or voidable