Types of Mistake: 3 Major Types of Mistake in Contract Law

In this article, we will be looking at the different types of mistake in the law of contract. Consequently, If you are a law student or a lawyer and you really want to grow you knowledge in contract law, it is very essential that you read this content painstakingly because you are definitely going to learn something new. Basically, this article will highlight the types of mistake in contract law and the legal effect of all the types of mistake.

Types of mistake in Contract law

Types of mistake in Contract law

Also read: Exceptions to privity of contract rule

Introduction

A layman may think that the law will not be enforceable to any contract where one or both of the parties to the contract would not have made the contract had the true facts been realized. But this is not how it works in the law of contract generally. Legal mistakes operates within very narrow limits. It applies only to facts, and even so, only within the narrow area of mistake of facts which are fundamental.

Many writers have adopted different types of mistake in contract law. Treitel identified two broad classifications, viz, mistake which nullifies consent and mistakes which negatives consent. Accordingly, Anson’s Law of Contract and Chitty on Contracts also identify two types which they call mutual mistake and unilateral mistake. Nonetheless, in this article, we will be looking at the three most adopted types of contract for easy understanding.

But before we move to the crux of this article, it is very important to know what a mistake is. Below is a simple definition of mistake as it relates to the law of contract.

What is a mistake in the law of contract?

According to Wikipedia’s article on legal mistake, a mistake is an erroneous belief, at contracting, that certain facts are true. When there is a mistake in a contract, the court can declare the contract void ab initio (from inception) or voidable, or in some cases give and equitable remedy. This shows that not every legal mistake will totally put an end to the contract. As we continue, you will see other equitable remedies where there is a mistake in contract.

Effect of mistake in the law of contract

At common law proof of legal mistake renders the contract void ab initio. That being the case, money paid under the agreement may be recovered as money had and received. Such an action lies in Quasi-contract. It means that the money is paid without a corresponding consideration for it, since the contract under which the payment is made is a nullity.

Furthermore, property transferred under a contract vitiated by mistake is recoverable from the transferee. It is recoverable since the contract under which it is transferred is void. The transferee gets no title to the property. If he keeps it, he does so without any right. This may be illustrated by the case of Cundy v Lindsell [1878] 3 AC 459. There are also other leading contract cases on this principle.

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Types of mistake in contract law

1. Common mistake

This type of mistake occurs where both parties, A and B, make the same mistake. A and B perfectly understand each other and their respective intentions but they are mistaken about some underlying and fundamental fact. They may both be ignorant of the fact that the thing which is the subject matter of their contract does not exist or has ceased to exist.

The real legal question posed in analysing the effect of a common mistake and indeed every other kind of mistake is one of offer and acceptance. Has there been a real correspondence of offer and acceptance?

In other words, has an agreement been reached or not? As can be seen, where the issue is one of common mistake, consense is not in dispute. What is contended is that because of a common error as to some fundamental fact, the agreement or consensus is nullified.

Common mistakes normally occur in varied situations, but the most prominent is the case where the subject matter of the contract is no longer in existence (Res extincta).

Res Extincta:

Here, there is a mistake as to the existence of the subject matter of the contract. This renders the contract void. Take for instance, in Couturier v Hastie, a man bought a cargo of corn which he and the seller thought at the time of the contract to be in transit from Salonica of England, but which unknown to them had become fermented and had already been sold by the master of the ship to a purchaser at Tunis. It was held that the contract was void and the buyer not liable for the price of the cargo.

Lord Cranworth held that;

“The contract plainly imports that there was something which was to be sold at the time of the contract and something to be purchased. No such thing existing; I think the Court of Exchange Chamber has come to the only reasonable conclusion upon it”

The effect will also be the same if the contract is for the sale of specific goods that have already perished.

Res Sua:

In this case, the seller of the subject of the contract unknown to both parties has no title in the property sought to be transferred. For instance, in Abraham v Oluwa [1944] 7 NLR 123, the plaintiff bought and paid for a piece of land from the defendant which unknown to both of them, was the plaintiff’s land.

It was held that the transaction was void and the plaintiff was entitled to recover his money. A similar decision was arrived at in Bingham v Bingham, where A bought from B an article that belongs to A.

Other cases of common mistake

There are generally common mistakes as to quality, type or characteristics of the subject matter. The court have consistently held that such specie if common mistake do not make a contract void. For example, in Leaf v International Galleries [1950] 2 KB 86, the plaintiff bought from the defendants a picture which both of them wrongly thought was painted by constable. It was held that the contract was not void.

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2. Mutual mistake:

Mutual and common mistakes are similar in one important aspect. They both involve a mistake of both parties. But whereas both parties make the same mistakes in a common mistake, in mutual mistake, they make different mistakes. In this case, both parties misunderstand each other.

Take for instance: A intends to offer, and in fact does offer to sell his video set to B. B accepts the offer in the honest belief that what A was offering to sell was a radio set. A does not know of B’s mistake and B does not also know of A’s mistake.

In this situation, the parties are not ad indem. In other words, they do not have one mind.

In this case, the real legal question posed is one of offer and acceptance. Has there been a real correspondence of offer and acceptance? In other words, have the parties reached and agreement or not?

In a mutual mistake, unlike a common mistake, the very existence of the agreement is denied. What is urged by the plaintiff is that despite appearance, there is no real correspondence of acceptance between him and the defendant. Put in a different way, the real contention of the plaintiff is that the mistake complained of negatives or precludes the existence of a consensus.

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3. Unilateral Mistake

In a unilateral mistake, as the name implies, only one party is mistaken. For example: A with full knowledge offers to sell an imitation of a Toyota Corolla carburetor to B. B accepts the offer, believing the Carburetor to be a genuine original Japanese made Carburetor. A knows of B’s mistake. Concerning the transaction, therefore, only B is actually operating under mistake.

On the part is the mistaken party, the test is subjective as what the law is usually concerned with is his state of mind, his actual belief and intention. The court will concern itself with what a reasonable man in his position would have thought or believed.

Assuming, however, that the unmistaken party did not induce the mistake of the first party, the courts will presume him to have known of the other party’s mistake if the circumstances are such as to have the mistake obvious to a reasonable man.

Consequently, in Hartog v Collins and Shields [1939] 3 All ER 566, the court held that the plaintiff had known that the defendants intended to sell at a price per pound instead of per piece which they had mistakenly offered. Their action to enforce the contract was therefore dismissed.

It is important to know that most of the cases in which the issue of unilateral mistake has arisen have been cases of mistake as to the person or mistaken identity. In this connect, what the party who pleads unilateral mistake is arguing is that, despite appearance, there has been no real or genuine agreement between him and the other party.

The offer he made was made to a different person and not to the person who purported to accept it. Where a successful plea of mistaken identity is made, there is an operative mistake and the effect is to render the contract void ab initio.

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Wrapping up:

In all cases of mistake, where common, mutual or unilateral, equity has sometimes intervened in order to reduce hardship. The intervention of equity means that although the contract may be held to be invalid at common law, it can still be set in equity. Thus, in Solle v Butcher [1950] 1 KB 671, Lord Denning highlighted the circumstances in which the court will grant equitable relief in cases of mistake. You can read that case to find the instances.

So far, i am sure that you have learned a lot about how mistakes work in the law of contract by understanding the types explained above. Well, if you still have any question or contribution concerning the types of contract kindly let me know using the comment section.

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