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Contract Law Vitiating Factors Mistake Notes

BCL Law Notes > Contract Law: Vitiating Factors Notes

This is an extract of our Contract Law Vitiating Factors Mistake document, which we sell as part of our Contract Law: Vitiating Factors Notes collection written by the top tier of University College Dublin students.

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MISTAKE
1) COMMON MISTAKE - where the parties share the same mistaken about precisely the same thing 2) MUTUAL MISTAKE - where both parties are mistaken but about different things - they're often said to be at 'cross-purposes'
3) UNILATERAL MISTAKE - where one party is mistaken - usually due to the other or another party's deliberate creation of the mistaken belief.

COMMON MISTAKE
Couturier v Hastie
Sale of corn. Corn is on a ship. Unbeknownst to both parties, when they entered the contract the ship has already sunk. Contract void as in effect it never existed

Galloway v Galloway
A separation agreement between married couple would be set aside for mistake if it transpired that they were never validly married in the first place.

Fitzsimons v. O'Hanlon [1999] - Irish
Concerns the estate of a deceased person worth around £150,000. The nearest relatives sought to inherit. A person arises to be a non-marital child of the deceased which means the they, being the closest surviving relative would get the estate. They reached an agreement - child gets 60,000 and the balance goes to the other relatives. Subseq. Discovered that the deceased had a secret bank account which had £58,000. Now, the nonmarital child wants a share of this, too. They argue that the original agreement be set aside for mistake as both parties were mistaken. The mistake - estate worth 150,000 when it was actually worth 208,000 approx.
Court upheld agreement:
- Foreseeable that additional funds may be found despite the genuine belief of both parties Why? He had an uncovered child, why would it be odd for him to have uncovered assets. Mistake not fundamental enough. P should have opted for a PERCENTAGE rather than a fixed sum.

O'Neill v Ryan

• Difficult to have a contract declared void for common mistake unless it is absolutely fundamental so that it goes to the very core of the contract.

Costello J
''The circumstances in which a shared common mistake will nullify a contract are extremely limited".

Associated Japanese Bank v Credit du Nord SA
THE TEST for common mistake:
1) Law ought to uphold rather than destroy apparent contracts 2) Unexpected and wholly exceptional circumstances 3) To attract legal consequences, mistake must substantially be shared by both parties and MUST relate to facts as they excited at time of entry 4) Mistake must render subject matter radically different from the subject matter that the parties believed to exist 5) Mistake must not be a mere belief of one party without reasonable grounds for that belief

VOIDABLE IN EQUITY

• Developed over time

• Came from a couple of cases

• In particular:

Solle v Butcher
Court opened up idea of common mistake in equity - L Denning The Great Peace
Significant judgement
In effect, about a sinking ship. The owners are key - the stricken vessel receives help ASAP. They contact brokers to find a ship that's near to the stricken vessel that's in the process of sinking who might be able to provide help. The brokers say: based on information from a source that's usually reliable, assistance could be provided by 'the great peace' ship. The great peace si hired for 5 days initially to provide rescue services amounting to a contract. However, after entering the Ds discover that the Great Peace is further away to the vessel than they thought. The vessels should be only 35 miles apart according to the info. Given at the start. They were in reality, 410 miles apart.
This was discovered within hours - help not anyway near as close to sinking vessel as the thought. The D's then search for a nearer vessel for help, they find one and hire it to provide rescue > new contract. What about original contract they wish to get out of. They argued common mistake:
When first contract entered, both parties believed it to be 30 miles away from the rescue site. Courts rejected argument:
Despite the common mistake, it was not fundamental enough to render the contract void.
- The point of the contract was to provide help. Distance not the root as it was still in a position to provide rescue services.
Noted also, that even when D knew the truththey did not seek to cancel straight away.

Only attempted to get out of contract when they found a nearer one > if they didn't find it, they would've relied on the first one. If it was fundamental enough, you would have cancelled contract straight away.
What about common mistake in equity?
- There's no such thing. In England
Court said: It was created by L Denning but when creating it, he overlooked
H.O.L decisions who are in a superior court.
What about common equity in Ireland?

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