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Questions and Answers
If a unilateral mistake is known to the other party, the mistaken party can ______________ the contract.
If a unilateral mistake is known to the other party, the mistaken party can ______________ the contract.
escape
According to the caveat emptor rule, the buyer must ______________.
According to the caveat emptor rule, the buyer must ______________.
beware
A unilateral mistake refers to a situation where one party to the contract is mistaken, while the other party is ______________.
A unilateral mistake refers to a situation where one party to the contract is mistaken, while the other party is ______________.
aware
The case of Smith v Hughes illustrates that a unilateral mistake as to the terms of the contract prevents ______________.
The case of Smith v Hughes illustrates that a unilateral mistake as to the terms of the contract prevents ______________.
Frustration occurs when a contract becomes impossible to fulfill due to a ______________ change in circumstances.
Frustration occurs when a contract becomes impossible to fulfill due to a ______________ change in circumstances.
In the case of Smith v Hughes, the rule of ______ applies, which means the buyer has full opportunity of inspecting and forming his own judgement.
In the case of Smith v Hughes, the rule of ______ applies, which means the buyer has full opportunity of inspecting and forming his own judgement.
A common mistake will render the contract ______ as if there was never a contract.
A common mistake will render the contract ______ as if there was never a contract.
For a common mistake to be considered, the mistake must be ______ fundamental so as to render the expected contractual performance ‘essentially different’ or ‘impossible’.
For a common mistake to be considered, the mistake must be ______ fundamental so as to render the expected contractual performance ‘essentially different’ or ‘impossible’.
In the case of a common mistake, the party invoking the mistake cannot be at ______.
In the case of a common mistake, the party invoking the mistake cannot be at ______.
The doctrine of ______ applies if the contract contains no provision that covers the situation.
The doctrine of ______ applies if the contract contains no provision that covers the situation.
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Study Notes
Mistake
- A unilateral mistake occurs when one party to a contract is mistaken, and the other party may or may not know about the mistake
- In cases of unilateral mistake, the mistaken party can escape the contract if the other party knows about the mistake (Smith v Hughes)
- However, if the other party does not know about the mistake, there is no relief for the mistaken party
- A unilateral mistake can be either pure (unknown to the other party) or known (the other party knows about the mistake)
Types of Mistake
- Mistake as to terms: a party is mistaken about the terms of the contract
- Known: prevent agreement (Smith v Hughes)
- Unknown: no relief
- Mistaken assumption: a party makes an incorrect assumption about a fact
- No relief, even if the other party knows about the mistake (Smith v Hughes)
- Caveat emptor rule: buyer beware, and the buyer has full opportunity to inspect and form their own judgment
Cases
- Smith v Hughes: unilateral mistaken assumption, no relief even if the other party knows about the mistake
- The buyer is responsible for inspecting and forming their own judgment, and the seller is not liable for the buyer's mistake
- Digilandmall: known unilateral mistake as to the terms of the contract prevents agreement
- The Great Peace: common mistake, contract is rendered void if the mistake is so fundamental that it renders the expected contractual performance impossible
- The Peerless: cross-purposes mistake, may result in no contract
Common Mistake
- Occurs when both parties make the same mistaken assumption
- Test for common mistake: was the mistake so fundamental that it rendered the expected contractual performance impossible or essentially different?
- Effect: contract is rendered void as if there was never a contract
- No relief for common mistake if the terms of the contract govern the eventuality
Cross-Purposes Mistake
- Occurs when both parties are mistaken, but in different ways
- May result in no contract (The Peerless)
- Basis for the judgment: mistake as to terms = lack of agreement / no meeting of the minds, mistaken assumption = akin to common mistake
Effect of Mistake
- Contract is 'void' = there was never a contract
Frustration
- Occurs after the contract formation
- Contract discharged if 'radically different' (Davis Contractors v Fareham UDC)
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