Mistake Mugger Notes - Mistake(Mugger Notes 1 Introduction...

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Mistake (Mugger Notes) 1. Introduction Effect is to render contracts void , unlike misrepresentation which renders contracts voidable . There are 3 types of mistake: (i) Common ; (ii) Mutual and (iii) Unilateral mistakes. Cases fall into 2 Distinct Legal Categories : Has an agreement been reached or not? o Common Mistake : The presence of agreement is admitted . The rules of offer and acceptance are satisfied and the parties are of one mind. Owing to a Common Error as to some fundamental fact , the agreement is robbed of all efficacy . o Mutual or Unilateral Mistake : Very existence of the agreement is denied . Despite appearances, there is no real correspondence of offer and acceptance and that therefore the transaction must necessarily be void. Mistake must take place prior to the entering of the contract (and not after). Amalgamated Investment & Property Co Ltd v John Walker & Sons Ltd (1976) 3 All ER 509 (CA, England) ( Significance : Mistake must take place prior to the entering of the contract.) Facts : Contract made for the sale of a London warehouse which the purchaser, to the vendor’s knowledge, intended to redevelop. Before contract was made, government official decided that the warehouse should be listed as a building of special architectural interest. Actual listing only took place after contract was made. Purchaser claimed contract should be rescinded for Common Mistake. Held : CA held that the critical date was the date of contracting. On that date, both parties believed that the building was not listed and this was the case. Claim dismissed. A. Common Law The contract is rendered void ab initio (from the start), ie. the consent of the parites is said to be nullified. No rights or liabilities can accrue under such a contract. 3 rd parties can never obtain any rights under the contract. Eg. Where goods are sold to a bona fide 3 rd party, he gets no title and must surrender the goods. NB : Under misrepresentation, 3 rd party rights are a bar to rescission. Because of this result, Courts prefer to use equity doctrines. B. Equity Contract is rendered voidable . o The court will, if it thinks fit, set aside the contract on such terms as are just whether it is void at Common Law or not. Courts can set aside contract on terms and even rewrite them . o The court will rectify a written contract or deed that does not accurately record the agreement made by the parties. 2. Common Mistake Occurs when both parties to the contract make the same mistake . Each knows the intentions of the other and accepts it however. Both are mistaken as to some fundamental fact essential to the contract . The following 3 main reasons have been advanced for setting aside contracts under Common Mistake: A. Existence of Subject Matter (Res Extincta) 1
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If unknown to the parties, the specific subject matter of the agreement is in fact non-existent , no contract whatever ensues.
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