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Mistake Notes

GDL Law Notes > GDL Contract Law Notes

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A more recent version of these Mistake notes – written by Cambridge/Bpp/College Of Law students – is available here.

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Revision: Contract

[MISTAKE - VITIATING FACTOR]

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"Operative mistake" (sufficient to render a contract void) is more than a mere understanding

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It is a mistake of fact: either prevents the formation of a contract or which renders the contract something other than that which was intended

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It makes the contract void and not just voidable

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Operates only where the mistake existed at the time of contract formation - not where the mistake occurs subsequently (Amalgamated Investment)

Three Categories of Mistake:

1. Mutual: Both parties are mistake but in different ways. E.g.. I think I'm selling X some 'Coke' (the drink) - X believe he is buying some 'Coke' (the drug) - there is no contract because no agreement

2. Common: Both parties suffer the same misapprehension - offer and acceptance correspond (underlying agreement between the parties) - e.g. I agree to sell X some golf clubs - but overnight, unbeknown to either of us, they burn in a fire - we are both mistaken

3. Unilateral: Only one party is mistaken - e.g. one party knows the other has mistakenly mispriced a contract

Mutual mistake as to the identity of the subject matter

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Smith v Hughes: the test for agreement is objective - if on the evidence, a reasonable man would infer the existence of a contract, then it will be binding on both parties (per Blackburn J)

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But where there is a large degree of ambiguity (no discernible meaning can be found) - the contract will be void for mistake

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Raffles v Wichelhaus- two ships with the same name - it was impossible to tell from the contract which ship the coal would be on

Common mistake as to the existence of the subject matter

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If at the time of the contract and unbeknownst to the parties, the subject matter of the contract is not in existence (res extincta), there can be no contract

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