Contract 2nd Sem
Mistake
In contract law, a mistake is an erroneous belief, at contracting, that certain facts are true. It can be
argued as a defence, and if raised successfully can lead to the agreement in question being found
void ab initio or voidable, or alternatively an equitable remedy may be provided by the courts.
Common law has identified three different types of mistake in contract: the 'unilateral mistake', the
'mutual mistake' and the 'common mistake'. The distinction between the 'common mistake' and the
'mutual mistake' is important.
Common Mistakes as to the facts/ quality of the subject matter
- Implied promise as to the existence of the subject, hence compensation amount to the cost
of the car
1) Non-existence good of perishable (taking the chance of its existence)
2) Making an implied promise that goods are in existence (cost plus extra damages)
3) Subject matter of contract does not exist – voidable contract
- Existence of the good is the condition precedent to the existence of the contract
Link: http://www.lawteacher.net/cases/contract-law/mistake-cases.php
** McRae v Commonwealth Disposals Commission (1950) 84 CLR 377
The defendants sold an oil tanker described as lying on Jourmand Reef off Papua. The plaintiffs
incurred considerable expenditure in sending a salvage expedition to look for the tanker. There was
in fact no oil tanker, nor any place known as Jourmand Reef. The plaintiffs brought an action for (1)
breach of contract, (2) deceit, and (3) negligence. The trial judge gave judgment for the plaintiffs in
the action for deceit. He held that Couturier v Hastie obliged him to hold that the contract of sale
was void and the claim for breach of contract failed. Both parties appealed.
The High Court of Australia stated that it was not decided in Couturier v Hastie that the contract in
that case was void. The question whether it was void or not did not arise. If it had arisen, as in an
action by the purchaser for damages, it would have turned on the ulterior question whether the
contract was subject to an implied condition precedent. In the present case, there was a contract,
and the Commission contracted that a tanker existed in the position specified (specified longitude &
latitude). Since there was no such tanker, there had been a breach of contract, and the plaintiffs
were entitled to damages for that breach (expenses incurred for the trip, not for potential wealth)
Best position for the claimant: existence of the promise of existence of the subject
Sales of Goods Act 1979 (s.6 & 7) – there is a contract for a sale of a specific good, and the good
without the knowledge of the buyers/sellers, have perished at the time contract is made, the
contract is void.
- It doesn’t apply to the McRae case. Not a situation which the good is perished when
contract is made. (never existed)
- Presumption established by s6 could possibly be overwritten by the facts of the case.
(Promisor was confident with the existence of the subject)
- Only applies to sales.
If the mistake made was not fundamental element of the contract, the contract is not
voidable.
Mistake
In contract law, a mistake is an erroneous belief, at contracting, that certain facts are true. It can be
argued as a defence, and if raised successfully can lead to the agreement in question being found
void ab initio or voidable, or alternatively an equitable remedy may be provided by the courts.
Common law has identified three different types of mistake in contract: the 'unilateral mistake', the
'mutual mistake' and the 'common mistake'. The distinction between the 'common mistake' and the
'mutual mistake' is important.
Common Mistakes as to the facts/ quality of the subject matter
- Implied promise as to the existence of the subject, hence compensation amount to the cost
of the car
1) Non-existence good of perishable (taking the chance of its existence)
2) Making an implied promise that goods are in existence (cost plus extra damages)
3) Subject matter of contract does not exist – voidable contract
- Existence of the good is the condition precedent to the existence of the contract
Link: http://www.lawteacher.net/cases/contract-law/mistake-cases.php
** McRae v Commonwealth Disposals Commission (1950) 84 CLR 377
The defendants sold an oil tanker described as lying on Jourmand Reef off Papua. The plaintiffs
incurred considerable expenditure in sending a salvage expedition to look for the tanker. There was
in fact no oil tanker, nor any place known as Jourmand Reef. The plaintiffs brought an action for (1)
breach of contract, (2) deceit, and (3) negligence. The trial judge gave judgment for the plaintiffs in
the action for deceit. He held that Couturier v Hastie obliged him to hold that the contract of sale
was void and the claim for breach of contract failed. Both parties appealed.
The High Court of Australia stated that it was not decided in Couturier v Hastie that the contract in
that case was void. The question whether it was void or not did not arise. If it had arisen, as in an
action by the purchaser for damages, it would have turned on the ulterior question whether the
contract was subject to an implied condition precedent. In the present case, there was a contract,
and the Commission contracted that a tanker existed in the position specified (specified longitude &
latitude). Since there was no such tanker, there had been a breach of contract, and the plaintiffs
were entitled to damages for that breach (expenses incurred for the trip, not for potential wealth)
Best position for the claimant: existence of the promise of existence of the subject
Sales of Goods Act 1979 (s.6 & 7) – there is a contract for a sale of a specific good, and the good
without the knowledge of the buyers/sellers, have perished at the time contract is made, the
contract is void.
- It doesn’t apply to the McRae case. Not a situation which the good is perished when
contract is made. (never existed)
- Presumption established by s6 could possibly be overwritten by the facts of the case.
(Promisor was confident with the existence of the subject)
- Only applies to sales.
If the mistake made was not fundamental element of the contract, the contract is not
voidable.
