Different Types of Mistakes in Contract Law

Topics: Contract / Pages: 6 (1271 words) / Published: Dec 17th, 2012
“A common mistake, even on a most fundamental matter, does not make a contract void at law; but it makes it voidable in equity.”
To what extent does this statement represent the law after Great Peace Shipping Ltd. V Tsavliris, The Great Peace (2002)?

A mistake is an erroneous belief held by one or more contracting parties at the time of entering the contract, as to whether certain details pertaining to the contract were true. Mistakes can be classified in three categories; common, mutual, or unilateral. A common mistake in particular means that all parties to the contract were equally mistaken as to the same item/s in the contract and there was no true consensus ad idem. The remedy is usually to make the contract void or unenforceable. However, this remedy has not always been granted, as was the situation in The Great Peace (2002). It is now argued that not even a fundamental common mistake can make a contract void, rather it can make it only voidable in equity. This essay will- (1) look at the law prior to The Great Peace, (2) discuss how the law was applied to The Great Peace, and (3) examine how The Great Peace decision has been subsequently applied and its effect on the law generally.
Bell v Lever Bros and Solle v Butcher both represented the law prior to The Great Peace. In Bell, two employees of the respondent company were granted large ex gratia payments upon termination of their employment. Unknown to all parties, this payment did not have to be made, since the employees had violated a clause on the employment contract which sought to prohibit them from conducting business elsewhere while employed with the company. The company sued to get back the payments. The court held that the mistake was irrelevant since the company got what they wanted (the release of the employees) and the payment was only a side issue. Further, the court deemed that the contract was not significantly different from what the parties intended it to be, so it should be upheld.

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