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Mistake - Coggle Diagram
Mistake
Types of Mistake
- Non-agreement (common) mistake: both parties make same mistake which must be fundamental to the agreement and the party seeking to rely on this mistake, must have reasonable grounds for their belief. This operates where one party seeks to negate the agreement for mistake and the other party seeks to deny the mistake.
b. Mistake as to existence of subject matter (res extincta): Couturier v Hastie: will make the contract void at common law. Galloway v Galloway. Perishing of goods or non-existent goods: Section 7 SOGA. There is an exception where one party has taken responsibility for the non-existence of the subject matter: McRae v Commonwealth Disposals Commission, i.e. if the occurrence for mistake was provided for under the contract the courts will not deal with it. John Walker v Amalgamated Investments: contract becomes impossible subsequent to its creation. Bell v Lever Bros: contract may be void at common law for mutual mistake where the mistake forms the fundamental underlying assumption of the contract. Here a contract between a director and a company was not void, as there were other aspects of the contract not affected by the mistake. There is a limited exception to the ‘essential difference’ rule which will allow a claim for mistake to concern the quality, rather than the existence of the subject matter: Associated Japanese Bank v Credit du Nord.
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c. Mistake as to ownership (res sua): Cooper v Phibbs: 2 parties contract for some property but unknown to the parties, the purchaser already owns the property.
- Mutual agreement mistake: parties make different mistake and are at cross purposes- problem is the offer and acceptance of the mistake which prevents the formation of a legally binding contract. An objective test is applied as to whether the contract, in fact, exists: Smith v Hughes, cts will apply the objective test and will consider how reasonable the interpretation of the parties was as seen in: Leaf v International Galleries: mistake over who painted a painting. It is difficult to establish that a mistake is sufficiently fundamental so as to render the contract void. In Leaf, ct held that the common mistake was merely a mistake as to quality and not fundamental to the contract operating and was therefore not void; even if not void at common law, may be voidable in equity (Solle v Butcher), however this has been departed from in the english cts in Great Peace Shipping, it is still good law in Ireland: O’Neill v Ryan.
- Unilateral mistake: where parties are mistaken as to part of the contract and therefore, no consensus ad idem (meeting of minds) normally mistaken identity. one party is aware of other party’s mistake. The mistake must relate to terms rather than motives.
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Lewis v Avery: mistake is as to identity, the contract is void, not voidable. This is a distinction as to identity mistakes and mistakes as to attributes.
Cts will assess whether knowledge may be imputed to a party if a reasonable man would have recognised the mistake; standard of reasonable man: Chwee Kin Keong v Digilandmall.com (snapping up or taking advantage of an opportunity).
If one party is aware of mistake, contract is not formed (Webster v Cecil).
If however, one party does not know of other party’s mistake, contract is formed: Wood v Scarth.
Knowledge of one party of the others mistake may make the entire contract void. Therefore no contract formed: Slattery v Friends First.
Special case of mistaken identity where it would be possible to take an action for fraudulent misrep (voidable, title passes) or mistake (void, no title passes). This was seen in Cundy v Lindsay, where a fraudster ordered goods under a name similar to a reputable firm. Not face to face and the contract may be rendered void as opposed to voidable, this is because if there is no face to face meeting then the mistake to identifies fundamental -like you never meant to deal with that person.
Phillips v Brooks: must be established that the party wants to deal with specific person and nobody else, presumption that you intend to contract with the person in front of you: Ingram v Little, these contracts will be declared voidable. Here a fraudster induced sellers of a car to accept a cheque thinking he was reputable, offer was directed to a reputable man and not a fraudster- different to Phillips because the seller went to the bother of confirming the identity of the person they were contracting with.
Lewis v Avery: person was present, and there was a presumption of intention to delay with that person i.e. voidable for misrep.
Shogun Finance v Hudson: face to face contracts are the recognised exception to the rule i.e. where an innocent party intends to contract with a company and the individual they contract with holds themselves out to be an agent of the company but has no authority to act so. In Shogun, Cundy was criticised. The facts involved a rogue licence and entered into an agreement with a finance company. Held that no contract existed.
Remedies
Remedies depend on the scale of the loss, as always. For example was the mistaken term a warranty or was it made fraudulently or negligently. For this type of loss, damages would be considered.
For the types of mistake outlined above i.e. non-agreement, unilateral and mutual, you would invoke the equitable remedy of recession.
Also with mistake, cts have given the parties the chance to rectify the mistake: see Irish Life v Dublin Land Securities, and Lucy v Laurel Construction.