Contents

Introduction .................................................................................................................................. 2
Common mistake ......................................................................................................................... 2
Case 1........................................................................................................................................... 3
McRae v Commonwealth Disposals Commission (1951) 84 CLR 377 ...................................... 3
Case 2 ........................................................................................................................................... 5
Bell v Lever Brothers Ltd [1932] AC 161 ...................................................................................... 5
Mutual mistake ............................................................................................................................ 6
Case 1........................................................................................................................................... 7
Raffles V. Wichelhaus ................................................................................................................. 7
Case 2........................................................................................................................................... 8
Goldsborough, Mort & Co Ltd v Quinn [1910] 10 CLR 674 ...................................................... 8
Unilateral mistake ........................................................................................................................ 9
Case 1......................................................................................................................................... 10
Smith v Hughes (1871) LR 6 QB 597 ....................................................................................... 10
Case 2......................................................................................................................................... 11
Taylor v Johnson [1983] HCA 5; (1983) 151 CLR 422 ............................................................ 11
Introduction

In certain circumstances, a contract may be void at common law due to a mistake made
by the parties concerning the contract. Even where the contract is valid at law, it may
nevertheless be voidable in equity on the grounds of mistake.

The situations in which a contract will be nullified or rescinded for mistake are contained
in a disparate group of cases; there is no underlying general "doctrine" of mistake.

A mistake which has the effect of rendering a contract void is described as an

"operative" mistake. A mistake as to law, as opposed to a mistake of fact, will not be
operative.

I the law relating to mistake will be considered under four heads:

1. Mistake relating to documents;

2. Identical or "common" mistake;

3. Non-identical mistake, which may be "mutual" or "unilateral";

4. Mistake as to identity.

Common mistake

In this case, the parties, there is a contract obviously, but I signed a contract on the basis
of the underlying assumptions and false. Since both parties make the same mistakes, it
can be described as a common mistake or identical. The contract, it is not disabled in the
common law in this situation necessarily. Examples may be classified as follows:

Mistake as to the existence of the subject-matter

Do not know the party, if any, if the subject matter of the contract does not exist, the
contract will be disabled in the common law or disappeared. In couturier pair Hastie, HL,
1856, cargo of corn, is on the way to London, it had to be sold in the port of refuge as it
was starting to ferment. It is not aware of this, the parties agreed to sell corn in London.
This, that the seller is not entitled to the price of goods was held.
Similarly, the parties may contract on the basis of a false assumption which underlies the
contract. In Galloway v. Galloway (1914), a man and woman, believing they were
lawfully married, entered into a separation deed. In fact the "marriage" was invalid and
therefore the separation agreement was likewise void.

It may be, however, that the proper construction of the contract is that the risk of the
subject-matter or state of affairs not being in existence falls on one party or the other. For
example, one party may be warranting the existence of the subject-matter; if so, the
contract is valid; McRae v. Commonwealth Disposals Commission (1950)

There is a unilateral mistake that has been mistaken for a subject to terms and one party
only to the contract is included in the contract. Mistake of this kind are more common
than other types of errors. One, there is a need to distinguish between the business error
and mechanical calculation of first when I saw the unilateral mistake. Calculations
mechanical provides that no ('snatch' a plan that includes a bargain that did not intend to
make one other party, or to take advantage of a mistake, the parties for these reasons
errors, such as arithmetic,) might be able to set aside the contract betrayed. By objective
criteria, mistakes, person or a reasonable you can see if you can know that it would not
make sense to any of the parties this. Unless snatched offer 'up' one-sided is one of the
parties, if this is not the case, the court will keep the contract.

Case 1

McRae v Commonwealth Disposals Commission (1951) 84 CLR 377

Sometime in 1945 an oil barge was wrecked on a reef surrounding Omar Islands. In the
Melbourne Argus newspaper on 29 March 1947 the following advertisement appeared:

Tenders are invited for the purchase of an oil tanker lying on Jourmaund Reef, which is
approximately 100 miles North of Samarai. The vessel is said to contain oil. Offers to
purchase the vessel and its contents should be submitted to the Commonwealth Disposals
Commission.

The plaintiffs (McRae and others, appellants before the Full High Court), tendered for the
tanker, offering to pay £285. On 11 April this tender was accepted by the Commonwealth
Disposals Commission, and the tanker sold to the plaintiffs. A sales advice note was sent
on 15 April. The plaintiffs spent substantial sums of money fitting out an expedition and
searching for the tanker. However, it could not be found and it transpired that no tanker
had ever existed at the location shown in the advertisement or the Commission's letter of
April 18 confirming its supposed location. The plaintiffs sued in the original jurisdiction
of the High Court for damages for breach of contract and misrepresentation. Webb J held
(see (1950) 84 CLR at 386, 387) on the authority of Couturier v Hastie (1856) 5 HLC
673; 10 ER 1065 that as there was no tanker to sell there was no contract, but that £576
10s should be awarded for misrepresentation. The plaintiffs appealed to the Full Count
and the Commission cross-appealed.

Comments

The emphasis of the principal case is that the law has been misunderstood and that it is
very rare for a contract to be void on the ground of common mistake. Leaving aside the
theory, it is most inconvenient in practice to hold the contract void, since it not only leads
to unsatisfactory attempts to unravel what has been done but also precludes the
imposition of a liability in damages. At the end of the day, the fundamental question, as
the High Court pointed out, is 'What did the promisor promise' Bell v Lever Bros Ltd
[1932] AC 161 is a rather peculiar case. In effect, A and B were employed by C but had
breached their contract

in such a way that they could be dismissed without compensatory payment. However,
this was not known and A and B were paid £50,000 for termination of their employment.
The court seemed to agree that a fundamental mistake common to both parties may
render a contract void, but a majority thought that the mistake which led to the contract to
pay £50,000 was not a fundamental one. In what circumstances then will a mistake be
'fundamental'? Purports to sell four machines to a bank (B). B leases the machines back
to A. B had been unwilling to enter into the transaction unless an acceptable guarantor
could be found. C agrees, for a fee, to guarantee A's performance of the lease. The
guarantee expressly requires C's consent to any substitution of the goods comprised in the
lease. In fact, but unknown to B and C, A was acting fraudulently as the machines did not
exist. A defaults and B seeks to enforce the guarantee against C. Will it be successful?
See Associated Japanese Bank (International) Ltd v Credit du Nord SA [1989] 1 WLR
255. Compare the notes of the case: G H Treitel (1988) 104 LQR 501; John Cartwright
[1988] LMCLQ 300; Geoffrey Marston [1989] CLJ 173; J W Carter (1991) 3 JCL 237. A
significant point made by the principal case is that s 6 of the Sale of Goods Act 1893
(UK) (now Sale of Goods Act 1979 (UK)) does not apply to cases where the goods never
existed. Sections 6 and 7 of the Sale of Goods Act 1979 (UK) (for provisions
corresponding to s 7 see [20.36], [20.37]) may illustrate the relationship between mistake
and frustration. If the subject matter never existed, or perished prior to the contract being
agreed, the issue is whether the parties made a mistake. If the subject matter perishes
after the contract has been agreed the issue is one of frustration. In other words, mistake
is pre-contractual whereas frustration is post-contractual. Does it make any difference to
say that the issue is, in both cases, one of 'construction'? S agrees to sell B 700 bags of
nuts. Unknown to S there are only 591 in existence, the others having been stolen. Can B
claim damages for non-delivery of the 109 bags? Compare Barrow Lane & Ballard Ltd v
Phillip Phillips & Co Ltd [1929] 1 KB 574. Was the case correctly decided?

Case 2

Bell v Lever Brothers Ltd [1932] AC 161

The House of Lords reviewed the common law principles relating to common mistake in
Bell v Lever Bros Ltd76 but the judgments did little to clarify the law.

Snelling lever Brothers subsidiary, and required the board Bell, Chairman, services in
writing and lever Brothers had Co Ltd is the company's operations, to devote the whole
of their time to them yet each of the five years in Niger has not expired under the
contract, it was Vice President. Agreement has been claimed, is a common mistake, in
terms total price £ 50,000, lever paid into account (and thus, in the middle) that take, you
were the one who resigned they quickly. It is the interests of the secret to themselves,
they on the other hand, it was a holding company engaged in the actual transaction of
some private. This breach of fiduciary duty would have been entitled to lever to exit
without the need for payment of service contract and compensation immediately after.
Bell and Snelling was a tendency to consider the interests of their secret account, but he
has confirmed that it has denied responsibility to repay the £ 50,000.

Lever claimed damages fraudulent misrepresentation, breach of contract. Defendant

plaintiff, the lever, and discovered that I did not know the private trading of defendant,
the lever, alleged negative jury fraud, found that the defendant did not have to and have
the right to finish them, transactions in mind the end agreement was found that he had
committed a breach of contract of service they were negotiated.

The termination agreement, Court of Appeals affirmed the judgment of J held that light is
invalid for common mistakes to be able to recover the payment by the lever under it. The
House of Lords, allowed the appeal of the defendant. False assumptions party that the
ground of the decision was not a fixed-term unless the service contract by the agreement
because it was the subject matter of the actual contract, was not involved because of the
motive or quality just, well it was not in the basic nature.
On any reckoning the case is a difficult one, although it is supposed to be a watershed,
and later cases, at least in England, are to be read in the light of it. The decision was by a
majority of three to two. Lord Warrington, with whom Lord Hailsham agreed, dissented,
thinking the relevant test satisfied on the facts, that test being, in his Lordship's opinion,
'whether the erroneous assumption . .. was of such a fundamental character as to
constitute an underlying assumption without which the parties would have not made the
contract they in fact made, or whether it was only a common error as to a material
element, but one not going to the root of the matter and not affecting the substance of the
consideration'.78 Lord Atkin, in a most important judgment, first referred to the
suggested 'implied term' basis of holding contracts

Where both parties enter into a contract under a false and fundamental assumption then as
a general rule contract is valid.

Mutual mistake

A mutual mistake occurs when the parties to a contract are both mistaken about the same
material fact within their contract. They are at cross-purposes. There is a meeting of the
minds, but the parties are mistaken. Hence the contract is voidable. Collateral mistakes
will not afford the right of rescission. A collateral mistake is one that 'does not go to the
heart' of the contract. For a mutual mistake to be void, then the item the parties are
mistaken about must be material (emphasis added). When there is a material mistake
about a material aspect of the contract, the essential purpose of the contract, there is the
question of the assumption of the risk. Who has the risk contractually? Who bears the risk
by custom? Restatement (Second) Contracts Sec. 154 deals with this scenario.
Case 1

Raffles V. Wichelhaus

Raffles (Plaintiff) contracted to sell 125 bales of Surat cotton to Wichelhaus (Defendant).
The goods were to be shipped from Bombay to Liverpool, England on the ship
“Peerless”. Neither party was aware that there were two ships names “Peerless” carrying
cotton from Bombay to Liverpool, one arriving in October and the other in December.

Wichelhaus thought he had purchased the cotton arriving on the October ship, but Raffles
sent his cotton on December ship. Wichelhaus refused to accept delivery of the cotton
arriving on the December ship and Raffles brought this lawsuit for breach of contract.

Result:

The court, as far as possible, the court but we are working on finding a reasonable
interpretation in order to maintain an agreement which was not able to ship determining
the name Peerless is intended in the contract in Raffles. As there was no consensus ad
idem, and as a result, - (As defendants claimed) the meeting of the mind, the two did not
agree on the same thing, there was no binding agreement at all. Therefore, I did not have
the defendant wins, pay.

Statement:

To do so, that the plaintiff should sell to defendant, in Liverpool, to wit, the agreement
between the defendant and the plaintiff, to wit, defendant, buy 125 bales of Surat cotton
plaintiff, of a particular product, Dhollorah to arrive EX "Peerless" from Bombay
merchants are guaranteed a fair middling; cotton and is to be taken from the quay that, 17
½, at a rate of d, to wit, the defendant at a constant rate it or you will pay the plaintiff for
the same. The per pound, within a certain period of time, it agreed to after the arrival of
goods mentioned in England then.
Case 2

Goldsborough, Mort & Co Ltd v Quinn [1910] 10 CLR 674

Basic facts were recorded at [2.100]. Mistake of mutual suspicion, was born in this way.
The option contract,. Appellant mentioned the sale "at a price of one pound 10S
calculated per acre on the basis of 'freehold is, that it be made the crown in order to pay
the required land make up the acres of 20s , has been deducted from the claim price as if
you've been making the freehold by one vendor, this is meant that it was supposed to be
the price to be paid in cash actually is estimated. under this interpretation on what sum he
may pay the crown in relation to land, respondents (vendor) is the word of. respondents
will receive a definite sum of 10 seconds per acre above, appellant he it is argued clearly
the sum of one pound 10S under per acre of 'interpretation, that is, the means that we
could have not the total price of £ 3980, to receive a total amount of £ 1680.

Comments

(1) It, finding examples of mutual mistake is very difficult. (1864) in 2 H & C906
Raffles V Wichelhaus, B and 159 ER375, S is sales, signed a purchase contract of cotton
in order to arrive at the Peerless from Bombay. There was one in October two ships, in
December to leave Bombay of that name, and the other in practice. B, refused to accept
the goods shipped to ship in December but, S was not successful in the case of damages
for non-acceptance. Does this mean that there was no contract between the B and S?

(2)Assume that the case for mistake had been made out, what sort of mistake would it
have been? Would it have been mutual or unilateral?

(3)If mutual mistake occurs the effect at common law is that there is no contract. Is this
because offer and acceptance do not correspond? If this is the position does a doctrine of
mutual mistake exist? Was there an assumption in the principal case that mutual mistake
as to the price would have rendered the contract void?

(4)Can you see any circumstances in which a court would order rescission of a contract
on the ground of mutual mistake? See Carter and Harland, para 1237.

(5) Principal case is involved equitable remedy of specific performance on whether that
was available. Of course, not there, it did not contract, a relief that would not have been
available, but the contract, the court, to justify the refusal by the court to exercise its
discretion it still once it was decided to present was necessary to consider whether there
is a situation. Mistakes in that context is relevant factors only.
Unilateral mistake

Here one party is fundamentally mistaken concerning the contract and the other party is
aware of the mistake, or the circumstances are such that he may be taken to be aware of
it.

For a unilateral mistake to be operative, the mistake by one party must be as to the terms
of the contract itself, as in Hartog v. Colin and Shields (1939). Here the defendants
offered goods to the plaintiff at a certain price per pound but had intended to offer them
at the same price per piece. The value of a piece was one third that of a pound. It was
held that the circumstances were such that the plaintiffs must have realized the
defendant's error, which, as it concerned a term of the contract, rendered the contract
void.

A mere error of judgment as to the quality of the, subject-matter will not suffice to render
the contract void for unilateral mistake. In Smith v. Hughes (1871), the defendant was
shown a sample of new oats by the plaintiff. The defendant bought them in the belief that
they were "old" oats; he did not want "new" oats. The court was of the view that the
mistake was merely as to quality of the subject-matter and could not render the contract
void, even if the plaintiff seller knew of the mistake.

Unilateral mistake in equity

As with mutual mistake, equity follows the law and will rescind a contract affected by
unilateral mistake or refuse specific performance as in Webster v. Cecil (1861). In that
case, the defendant, who had already refused to sell his property to the plaintiff for
£2,000, wrote offering to sell it to him for £1,250. This offer was immediately accepted.
The defendant had intended to write £2,250. It was held that the mistake was operative
and specific performance would be refused.
Case 1

Smith v Hughes (1871) LR 6 QB 597

Facts

Plaintiff on July 31 , farmer , showed a sample of wheat English manager of defendant .

Trainer defendant , the owner of the race horse , agreed to pay the 34S oats , 16 quarter
quarterly , they , they complained when it was sent to that it was a new wheat . He said he
thought he was buying old wheat . Oates was insufficient but , 34S was the high price for
the new wheat . The plaintiff sued to recover the £ 34 15S 8D.

Found a judgment for the defendant , question for the Court of Queen's Bench of , was
whether the direction of the judge to them or were right jury .

Cockburn CJ. - Left two questions to the jury the judge learned the court of the county :
and whether it was used in reference to the wheat in the conversation of the manager
between the defendant and the plaintiff first , the word ' old ' , second that he has been
reduced to the old wheat for , I believe , it was under or impression , defendant , plaintiff
is whether believed you , are you instruct the jury to find for the defendant he it is a case
of either .

Since this jury , regret that it has not been necessary to provide a specific answer to a
question left to them. , I think , there may be doubt about the validity of the direction of
the judge , in which case , that there is a possibility that given for the defendant on the
ground the first verdict of them it's pretty whereas now the to be possible, as it is possible
, verdict of the jury - in the event of all some of them - or might have proceeded on the
ground of the second , but we it is called when you consider , by reference to the second
question , to determine a judge's decision learned whether was right .

It is said to have seen the wheat from the old , nor must assume we did not said on the
subject of the manager of the defendant that wants nothing buy oats old for this purpose ,
the on the other hand , while it is necessary to assume that the manager of the defendant
believed in wheat , the plaintiff , provides guidelines , was aware of the presence of belief
such , nothing , or directly to bring it we be a wheat for old as indirectly , provide wheat
his simply was passing the exhibition , a sample of his , did not even rest completely
passive , and mind of the other . Under these circumstances , the question is whether or
not , will give the latter right for passive acquiescence of the seller to avoid the contract
in the self-deception of the buyer .

Case 2

Taylor v Johnson [1983] HCA 5; (1983) 151 CLR 422

Vendor and Purchaser - Contract of sale of land - Mistake - Price - Sale of ten acres for
$15,000 - Vendor under mistaken belief that price was $15,000 per acre - Purchaser
aware of vendor's misapprehension - Right to rescind.

Appeal - Function of appellate court - Findings of fact by judge sitting without jury -
Inferences of fact - Statement by judge that he was not assisted by demeanor of witnesses
and had to determine matter on balance of probabilities.

the High Court had to deal with a written contract for the sale of some ten acres of land
for $15,000. The vendor gave evidence that she believed and contracted on the basis that
the contract provided for a price of $ 15,000 per acre ($ 150,000 in total). There was
evidence that under its zoning at the time of contract, the value of the land was
approximately $50,000 and that if a proposed rezoning had become effective, its value
would be approximately $195,000. Since the purchasers sought specific performance, and
the vendor sought rectification, alternatively an order setting aside the contract of sale,
the issues between the parties fell to be decided on equitable rather than common law
principles. In their joint judgment, Mason ACJ, Murphy and Deane JJ appear to have
accepted that it is the objective rather than the subjective theory of contract which
properly determines whether a contract has been made, with the consequence that a
contracting party cannot rely on his own mistake to say that the contract was void ab
initio, even if the fact in question was fundamental to him and if the other party knew of
his mistake.

In saying this, their Honours adopted'76,"the following dicta founded in the objective
theory in the judgment of Denning LJ in Solle v Butcher Ojnce a contract has been made,
that is to say, once the parties, whatever their inmost states of mind, have to all outward
appearances agreed with sufficient certainty in the same terms on the same subject
matter, then the contract is good unless and until it is set aside for failure of some
condition on which the existence of the contract depends, or for fraud, or on some
equitable ground. Neither party can rely on his own mistake to say it was a nullity from
the beginning, no matter that it was a mistake which to his mind was fundamental, and no
matter that the other party knew that he was under a mistake.

Their Honours noted that Lord Denning's judgment had been referred to with approval by
Dixon CJ and Fullagar ] in McRae v Commonwealth Disposals Commission™ and
Svanosio vMcNamara.m They queried whether there were exceptions to the general rule
in the case of informal contracts and of mistakes as to the identity of the other contracting
party.

Solle v Butcher, McRae v Commonwealth Disposals Commission and Svanosio v

McNamara were all cases of common mistake as to matters extrinsic to written contracts.
But their Honours made it clear that they treated the con-sequence of validity referred to
above as extending to a unilateral mistake as to the existence or content of an actual term
of a formal written contract.180 It follows that where a written offer is snapped up, the
contract is not void.

Since their Honours 'left to another day' the question whether Lord Denning's dictum
applied to informal contracts such as those involved in Smith v Hughesm and Hartog v
Colin & Shields12 their judgment does not touch on the correctness of the position at
common law as expounded in those cases.

References

Mistake and Mis prepresentation By SJ Stoljar

Contract and Mercantile2nd Edition By Ellison Raha

Contract Law 4th Edition By Robert Duxbunry

http://www.australiancontractlaw.com/cases.html#g

http://www.legalmax.info/members2/conbook/acknowle.htm#bell_v_l.htm