Law of Unilateral Mistake

Topics: Contract, Common law, Contract law Pages: 7 (2587 words) Published: April 6, 2013
Cases under the law of mistake can be divided into common, mutual and unilateral mistake; however this discussion is based on unilateral mistake, as Stephen Graw said: “Operative unilateral mistake occurs when only one party in the contract is mistaken, the other party is or should be aware of that mistake and yet he purports to proceed with the agreement anyway.” Cases under unilateral mistake can be divided into three categories: Firstly mistaken identity, secondly mistake as to the terms of a contract and thirdly mistake as to the nature of a document signed. The main focus in this discussion is mistaken identity, where one party is mistaken as to the identity of another. Mistaken identity may happen in two different ways, at a distance or face to face. Mistaken identity is mostly due fraudulent misrepresentation by one party to another. However, it may operate in a different way, for example, A made a contract with B, believing B to be C, and B knows or ought to know of A’s mistake and he does nothing to correct it. The purpose is to give a clear explanation on why Lord Denning took the view that the two cases, Phillips v Brooks and Ingram v Little could not be reconciled and how the apparent conflict between these two cases was resolved by the decision in Lewis v Averay. This explanation will be given in four parts. Mistaken identity under common law

Under the common law it is established that the effect of mistaken identity is that it makes a contract void from the start. However, the common law also presumes that courts will not easily declare a contract void on the basis of the mistake. But if the mistaken party succeeds in presenting to the court three things, the presumption maybe rebutted and the contract maybe declared void for mistake. Firstly, if he can prove that he took the identity of the person he is dealing with as of vital importance. Secondly, if he can prove that he only intended to deal with someone else. And thirdly, if he can prove that the other person knew or ought to have known of his mistake. However, it is easier to rebut the presumption if the parties are dealing at a distance rather than face to face. Furthermore, courts will also not set aside contracts on the basis of mistake so as to avoid two things. Firstly, to avoid giving freedom to a person from his or her legal contractual obligations, and secondly to avoid the suffering of an innocent third party who has acquired an interest into the subject matter of the contract. Therefore, it is the courts duty to identify whether that mistake is indeed fundamental in the formation of the contract or not and thus identify what effects that mistake will have on the contract. There are four effects that a mistake may bring to an agreement. Firstly it may bring no effect at all, secondly it may bring to the mistaken party the right to set aside the contract, thirdly it may render a contract void and fourthly it may help the mistaken party to gain restitution on his property or amounts he paid without any legal obligation to do so. Legal principle and effect of mistaken identity prior to Phillips v Brooks The above discussion gives the effects of mistaken identity at common law. However, it is critical to identify the practical effect unilateral mistake may bring to a contract. This can be done firstly by analysing a few cases prior Phillips v Brooks and thus giving the legal principle that was used before. These past cases are Boulton v Jones, Cundy v Lindsay and King’s Norton Metal Co v Edridge, Merret & Co Ltd, and they were all through the post.

In Boulton v Jones, it was held that there was no contract between Boulton and Jones, as Jones never intended to contract with Boulton, and the Boulton knew of this; therefore, Jones had no legal obligation to pay Boulton since it was proven that Jones only intended to contract with Brocklehurst and that the offer was only intended for Brocklehurst. In Cundy v Lindsay, due to...
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