Relief at least since the high court handed down its

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relief — at least since the High Court handed down its decision in David Securities v Commonwealth Bank (1992) 175 CLR 353. In that case the Court ordered the defendant bank to return money that the plaintiffs had paid it under a mistake of law. The plaintiffs had made the payments in ignorance of s 261 of the Australian Income Tax Assessment Act, which made the relevant clause of the parties’ agreement illegal. Accordingly, because the payments had been made under that mistake of law the High Court held that the plaintiffs could recover them. Types of mistake There are three types of mistake: common mistake — where the parties both make the same mistake. For example, in Pritchard v Merchant’s and Tradesman’s Mutual Life Assurance Society (1858) 140 ER 885 the beneficiary under a life insurance policy which had lapsed paid a renewal premium to revive it. Unfortunately, at the time he did so (and unknown to either party) the insured person was already dead. The court held that because both parties had contracted in the mistaken belief that the insured was still alive, the transaction was void and the beneficiary could not collect. mutual mistake — where the parties are speaking at cross purposes, with each misunderstanding what the other means. For example, in Raffles v Wichelhaus (1864) 159 ER 375 the parties contracted for the sale and purchase of a cargo of cotton to arrive ‘ex Peerless from Bombay’. Unknown to the parties there were two ships called ‘Peerless’ both carrying cotton and both sailing from Bombay. The buyer intended to contract for the October cargo, the seller’s vessel was not leaving until December. The ‘contract’ was held to be void. unilateral mistake — where only one party is mistaken, the other party is aware of the mistake but tries to exploit it by proceeding with the contract anyway. For example, in Taylor v Johnson (1983) 151 CLR 422 the parties contracted to buy and sell about 10 acres of land. The contract specified a price of $15,000. When it came time to complete Mrs Johnson refused to settle arguing that she had thought that she was going to receive $15,000 per acre not $15,000 all up. The High Court accepted that Mrs Johnson had been mistaken about the price and it also found that Mr Taylor had both known of her mistake and had deliberately set out to ensure that she did not discover it until it was too late. On that basis the contract was set aside. The effect of mistake Although the remedies available for each category of mistake differ the general effect of mistake really only depends upon the nature and extent of the mistake that was made. If the mistake was so significant that it went to the very root of the resulting contract (such that the contract would not have been entered into had the true state of affairs been known), the contract will usually be void . That is, the contract is assumed never to have arisen, the parties are returned to their original positions and neither can sue or be sued.
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