Part 1: Mistake in Business Law

This document discusses the concept of mistake in contract law. It explains the different types of mistakes, including common mistake, mutual mistake, and unilateral mistake. The document also provides case examples to illustrate the application of these concepts.

0 | P a g e
Business Law

1 | P a g e
Part 1: Mistake
Answer 1
Consent is a key element of forming a valid contract which provides that both parties
must have entered into the contract willingly and under no pressure. There are certain
factors which impair the free consent of contractual parties such as mistake which is
categorised into four divisions which include common mistake, mutual mistake, unilateral
mistake and non est factum (Parker & Box, 2013). A contract become void or voidable based
on the type of mistake. When both contractual parties make the same mistake, then it is
referred as a common mistake which gives rise to remedies at common law. Common
mistakes are categorised into three parts which include res extincta, res sua and mistake as
to quality. In the case of Res extincta, the subject matter of the contract no longer exists due
to mistake based on which the contract becomes void as provided in the judgement of Scott
v Coulson [1903] 2 Ch 439.
In Res sua, the party forms a contract to purchase an item which belongs due to
which the contract becomes void. In the case of Mistake as to quality, the contract only
becomes void when the mistake is exclusive to the quality of the subject matter which is
different than what is believed by the parties (Hough & Kirk, 2018). A mutual mistake is
when both parties were mistaken about different things in such case the court uses an
objective test to see if the contract can be saved. As per this test, the court evaluates
whether a reasonable person would understand the similar meaning and if the answer is
yes, then the contract is valid, and otherwise it is void. In a unilateral mistake, only one
party had mistaken which is categorised into two parties: mistake of terms and mistake of
identity. When mistake is made regarding a term, then the contract remains valid.
Moreover, if the mistake is made regarding the identity of the parties, then it is considered
as void.

2 | P a g e
Answer 2
Case Type of Mistake Definition
Couturier v Hastie Res extincta (Common mistake) In this case, both parties
believe that the subject
matter of the contract exists
when in fact it does not exist
based on which the contract
becomes void (Parker & Box,
2013). Since the subject
matter of the contract
differs, the contract cannot
be considered valid by the
court.
Cundy v Lindsay Inter absentes (Unilateral mistake) When the contractual parties
did not meet face-to-face
while forming the contract,
for example, through email
or phone. In this case, the
court only evaluates whether
a mistake is made if the
claimant can demonstrate
identifiable person or
business with whom the
contract was supposed to be
constructed based on which
it becomes void (McKendrick
& Liu, 2015).
Raffles v Wichelhaus Mutual mistake When both parties have
mistaken the terms of the
contract. Both the parties
believe that they are
contracting for something
different.

3 | P a g e
References
Hough, T., & Kirk, E. (2018). Contract Law. Abingdon: Routledge.
McKendrick, E., & Liu, Q. (2015). Contract Law: Australian Edition. London: Macmillan
International Higher Education.
Parker, D. & Box, G. (2013). Business law for business students (3rd ed.) Pyrmont, NSW:
Lawbook Co.
Scott v Coulson [1903] 2 Ch 439