When would a unilateral mistake as to identity of the other party to a contract make the contract void for a mistake as to identity?
The three types of mistake recognised by the law are: Only particular types of mistake are actionable by the law of mistake. They include mistakes relating to: Depending on the type of mistake, a contract may be: The mistake lies in the written agreement - it does not record the common intention of the parties. Along with a series of other requirements, the mistake must be fundamental to the contract. It's a shared mistake, by both parties. It must be a fundamental assumption of a
state of affairs - a belief that it exists or does not exist - and the mistake make performance of that fundamental obligation impossible. The mistake must go to the essence of why the contract was made by the parties: Bell v Lever Bros (1932). The modern requirements for common mistake were confirmed by the Court of Appeal in Great Peace Shipping v Tsavliris
(International) Ltd (2002). They are: Up to the time of agreeing the terms of the written
contract, the parties must maintain a common intention. That common intention is not recorded in the written agreement. The proof of the intention must be convincing to overcome the presumption that written contracts are a true and accurate record of what was agreed. In mistake cases, that intention is not recorded in the written agreement and so it does not contain a true record of the agreement reached. Allocated RiskThe law of mistake is about attributing risk in an agreement where it has not been recorded in written agreement. There can be no common mistake where the contract allocates the risk of the event which is said to be missing from the agreement by mistake. Where risk was allocated in the written version of the agreement, the doctrine of mistake has no scope to operate. The risk might be recorded in (the erroneous version of the contract) in the form of an express term, implied term, condition precedent, condition subsequent, provided it states who bears the risk of the relevant mistake. Examples:Mistake as to the existence of the subject matterIn Couturier v Hastie (1856), a buyer bought a cargo of corn which both parties believed to be at sea. Unknown to the parties at the time of the contract, the cargo had been disposed of. The cargo could not be purchased, because it did not exist The court held that the contract was void because the subject matter of the contract had ceased to exist. Mistake as to TitleIn contracts for sale of goods, the buyer already owns the property and neither party is aware of it. The contract will be void. Mistake as to QualityIn Bell v Lever Bros it was said:
In Leaf v International Galleries (1950), both parties mistakenly believed that a painting was by the artist named Constable. The court held that the contract was valid. The fact that it was not painted by a particular artist was a matter to a quality or characteristic of the painting: the parties agreed that a painting would be bought, and the painting was sold. The fact that they thought it was by a particular artist (but it was not made by that particular artist) was nothing to the point. Mistake as to the possibility of performing the contractWhere the obligations under the contract are impossible to perform, the contract will be void. In Sheik Bros Ltd v Ochsner (1957), the land which was the subject matter if the contract was not capable of the growing the crops contracted for. The contract was held to be void. 2. Mutual MistakeIn a mutual mistake, both parties operate under a misunderstanding as to each other’s intentions. They are said to be at cross-purposes with one another. The mutual mistake negates consent and therefore no agreement is said to have been formed at all. Mutual mistake as to the identity of the subject matterThere is some ambiguity as to the understanding of the agreement. To assess whether a mutual mistake has taken place, the court asks what one party thought it meant, as opposed to what the other party thought it meant. The classic case is Raffles v Wichelhaus (1864). The defendant agreed to purchase Surat cotton to be delivered by the vessel named “Peerless”, which was due to arrive from Bombay. There were in fact two vessels fitting that description at the relevant time. The claimant was referring to one of the ships named Peerless; the defendant was referring to the other ship named Peerless. There was a latent ambiguity in the contract - the parties were actually referring to different ships. They were at cross-purposes with one another, and had not reached agreement at all. 3. Unilateral MistakeUnilateral mistake addresses misunderstandings between the parties that relate to the terms of the contract or the identity of the parties to the contract. It does not apply to mistakes about the facts known or assumed by the parties. In unilateral mistake cases, only one party is mistaken: the other party knows about it and takes advantage of the error. So, it's not a mistake made by both parties to a contract. In Hartog v Colin and Shields (1939) the seller had made a mistake as to the price of goods. It was held that the buyer must have realised the mistake. The contract was held to be void. Unilateral mistake does not apply in cases where the mistake relates to a quality of the subject matter of the contract (see above). Differences: Common Mistake and Unilateral MistakeThere are a series of differences between common mistake and other forms of mistake.
Unilateral mistake does not cater for mistakes of fact.
RemediesThe remedy for mistake include:
Rescission and rectification may (or may not) be inconsistent with one another. Whether they are or not would depend upon the facts which are disputed between the parties and whether rectification of the written agreement to its true agreed form would result in a right to rescission, and whether the right to rescind was claimed at all as part of the case. When contracts are rescinded or rectified, consequential further relief may be obtained, such as:
Rectification: Common MistakeIn order to obtain the remedy of rectification, the party alleging the mistake bears the burden of proof. The claimant must produce convincing proof that the mistake took place. The claimant must show that either:
Both the mistake and the common intention continuing through to the formation of the written contract must be proven. Damages may also be awarded as part of the remedy of rescission to restore the parties to the original positions before the contract as part of the remedy of rescission. What is unilateral mistake as to identity?Unilateral mistake to identity. Mistake as to identity occurs when one party – usually deceived by a "rogue" – believes themselves to be bargaining with another, uninvolved, third party. In a typical situation of this kind, the contract will either be void for mistake, or voidable for fraud.
Can a unilateral mistake as to fact make a contract void?A unilateral mistake is when only one party to the contract is under a mistake. In such a case the contract will not be void. So the Section 22 of the Act states that just because one party was under a mistake of fact the contract will not be void or voidable.
Can there be a mistake as to the identity of another party?Mistaken Identity
If the other party then claims that there is a mistake in identity (one that would make the contract void), they must argue that the parties did not intend for the terms of the contract to be binding.
What is the rule about a unilateral mistake?Unilateral Mistake of Law
If only one party is mistaken, the mistake is a “unilateral mistake” of law. One may rescind for a unilateral mistake of law only if the other party knows of, but does not correct, and takes advantage of or unfairly obtain the benefit of the rescinding party's mistake of law.
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