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Mistake Notes

GDL Law Notes > GDL Contract Law Notes

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Contract

MISTAKE

1 

Three categories of mistake

1) Mutual Mistake - where the parties are at cross purposes. Negatives the agreement as there never was a real agreement. Usually voids contract.
o 2) Unilateral Mistake - where one party is mistaken and the other party knows, or is deemed to know, of the first party's mistake. Contract may be void or voidable/
o 3) Common Mistake - where the parties have dealt on the basis of a fundamental misapprehension as to the subject matter of their contract, consent is nullified

1) Mutual Mistake

Sometimes said that two mistakes are therefore being made,
one by each party. The parties are clearly not ad idem.
 Most commonly the mistake will be regarding the identity or subject matter of the contract.
o Raffles v Wichelhaus (1864) - two ships called The Peerless left Bombay for Liverpool with a consignment of Surat
Cotton. D believed the October shipment was the one they had contracted for. Claimant believed it was the Decemebr shipment. Neither knew of the other shipment.
 Held the contract was void for mutual mistake.
o Falck v Williams [1900] - parties corresponded by telegraph, using a code. D carelessly omitted a comma.
Parties believed they were in agreement. In fact the plaintiff understood the contract to be for the carriage of copra from
Fiji to the United Kingdom, whereas the defendant thought that it concerned the carriage of shale from Sydney to
Barcelona.
 Neither party could prove their understanding was more likely. The matter properly turns on proof, not fault.
o Denny v Hancock (1870) - D declined to complete his purchase of a property having bid for it when he realised that it excluded three fine elms (the plans were vague).
 Held that the defendant's mistake was entirely understandable, that it had been induced in part through the carelessness of the vendors, and that it would not be just to compel specific performance.

2) Unilateral Mistake

Boulton v Jones (1857) - D ordered leather hosing from
Brocklehurst who owed him money so there was a set-off against the price of goods. Unbeknown to the defendant,
Brocklehurst had transferred his business to his foreman earlier in the day on which the order arrived.
 Held D had intended to contract with Brocklehurst. The
"capture" of an offer by one to whom it was never Contract directed will result in a mismatch between offer and purported acceptance so that no contract comes into being.
o The majority of the cases involve a fraud:
 Rescission is usually worthless as a fraudster has absconded/is penniless.
 Furthermore, the fraudster may have passed the property to a third party who buys without awareness of the fraud.
 If can rescind before this happens then third party has no rights (nemo dat).
 If rescission is attempted only after the third party has obtained the property, the third party is invulnerable to an action by the misrepresentee.
 If so may attempt to persuade the court not that the contract was voidable for fraudulent misrepresentation,
but that it never came into being at all, therefore void.
 But the law generally views that the defrauded misrepresentee did intend to contract with fraudster.
o Dealings by writing:
 Usually the contract will be the writer of the letters.
Exception found in Cundy:
 Cundy v Lindsay (1878) - Fraudster Blenkarn & Sons ordered handkerchiefs from plaintiffs, taking advantage of credit relationship between P and Blenkiron & Sons.
He obtained the goods on credit, sold them on to innocent third-party buyers, who were sued in conversion.
 Plaintiffs action succeeded. No contract had come into existence. Plaintiffs only intended to contract with Blenkiron and not Blenkarn.
 King's Norton Metal v Edridge (1897) - fraudster created false letterhead claiming to be a reputable company. Goods were sent to him and he sold them on.
Plaintiff's action failed.
 Question of who did P intend to contract with.
Answer was the writer of the letters. Where the fraudster proceeds by the adoption of a purely invented identity, the contract will be found to be with the fraudster.
o Face to Face Dealings
 Strong presumption that a contract will be found between the parties (seller and fraudster) who were physically present to each other.
 Phillips v Brooks [1919] - fraudster in jewellery shop pretended to be Sir George Bullough and purchased ring with a false cheque. Seller consulted directory and

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