Common Law: Mistakes Affect The Contract

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A mistake is an incorrect understanding by one or more parties to a contract. For a mistake to affect the validity of a contract it must be an "operative mistake", The effect of a mistake is: At common law, when the mistake is operative the contract is usually void ab initio (from the beginning). Therefore, no property will pass under it and no obligations can arise under it. Even if the contract is valid at common law, in equity the contract may be voidable on the ground of mistake. Property will pass and obligations will arise unless or until the contract is avoided. However, the right to rescission may be lost. Unfortunately, there is no general doctrine of mistake - the rules are contained in different groups of cases. This is also an area of confusing terminology. No two authorities seem to agree…show more content…
Where only one party to a contract is mistaken as to the terms or subject matter. The cases may be categorised as follows: (A) MISTAKE AS TO THE TERMS OF THE CONTRACT Where one party is mistaken as to the nature of 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, the contract is void. For the mistake to be operative, the mistake by one party must be as to the terms of the contract itself. See: A mere error of judgement as to the quality of the subject matter will not suffice to render the contract void for unilateral mistake. See: • Smith v Hughes (1871) REMEDY Equity follows the law and will rescind a contract affected by unilateral mistake or refuse specific performance as in: • Webster v Cecil (1861) 30 Beav 62 (B) MISTAKE AS TO IDENTITY Here one party makes a contract with a second party, believing him to be a third party (ie, someone else). The law makes a distinction between contracts where the parties are inter absentes and where the parties are inter praesentes. Contract made inter

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