Part 1: Mistake in Business Law

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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.