Mistake is where one or both parties enter into a contract under a falsehood or misunderstanding but would not have done so had they known the truth. There are three types of mistake that English Contract Law recognizes:
1. Common Mistake
2. Mutual Mistake
3. Unilateral Mistake
When the courts determine a finding of mistake, the contract becomes void. Essentially making it as if the contract never existed.
This type of mistake is when both parties to a contract make the same mistake. There are three different categories that give rise to a cause of action under common mistake.
a. Res exitncta: This is where the subject matter of a contract no longer exists. Thus, this applies when both parties enter into a contract with the belief that the subject matter exists when in fact, it does not. This contract can then be held as void for mistake. ( Scott v Coulson 1903)
b. Res sua: This is where the goods already belong to the purchaser. Essentially, in this situation, a party contracts to purchase something that already belongs to him or her. This will generally render the contract as void.
c. Mistake as to quality: This is only used narrowly because it is only capable to render a contract void where the mistake is to the existence of the quality which renders the subject matter of the contract different to what it was believed to be. (Great Peace Shipping v Tsavliris (International) Ltd 2003 )
This is where both parties make a mistake. They are misunderstood on both sides what the agreement actually is. The courts in this case apply an objective test to determine if the contract can be saved or void. They look at whether a reasonable person looking at the correspondence between the two parties would have understood the contract to hold a single meaning. If the answer is yes, the contract is valid. If the answer is no and the reasonable person would not have been able to confer one meaning from the contract, the contract becomes void for mistake. ( Raffles v Wichelhaus 1864)
In this type of mistake, only one party is mistaken. There are two different types that fall under unilateral mistakes:
1. Mistakes relating to the terms of the contract:
a. Hartog v Colin & Shields (1939)
2. Mistakes as to Identity:
This is generally induced by fraud. One of the parties to a contract claims to be someone they are not. This overlaps with misrepresentation however there is a better chance when the claim is based in mistake as the effect of finding a mistake due to fraud makes a contract void rather than voidable.
In determining whether a contract is held for void for mistake, the courts distinct between contracts made inter absentes (at a distance) and contracts made inter praesentes (face to face).
This is when the contract is made through dealings through the post, telephone, email, etc. The courts will make a finding of mistake if the claimant can demonstrate an identifiable person or business that they intended to deal with.
This is a contract where the parties have contracted face to face. In this instance, there can be a finding of mistake because the person intended to deal with the person in front of them.