Contract Law: Mistakes and Illegality

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Questions and Answers

What was the primary reason the House of Lords deemed the settlement agreements valid despite the parties' earlier breaches?

The mistake regarding the contract status was not fundamental enough. (correct)

The parties had renegotiated the terms of their contracts.

There was a unanimous agreement on the compensation amount.

The breaches were minor and did not affect the validity of the agreements.

In which case did parties assert a contract existed due to cross-purpose mistakes?

Raffles v Wickelhaus (correct)

Lever Bros v A and B

Peerless Cotton Company v Buyer

Bell v Lever Bros

What is generally regarded as a last resort argument in contract law?

Misrepresentation

Fraudulent inducement

Mistake as to quality (correct)

Breach of contract

Why was Lever Bros limited in their legal actions against B and A?

They could not prove any misrepresentation. Signup and view all the answers

What common issue arose from the contract in Raffles v Wickelhaus?

Two ships with the same name causing confusion. Signup and view all the answers

What principle can be drawn about mistakes in contracts from the cases discussed?

Only fundamental mistakes can void a contract. Signup and view all the answers

How did B and A's past breaches of contract impact their settlement agreements?

They were forgotten, influencing the agreements' validity. Signup and view all the answers

What does the principle of mistake as to quality imply regarding performance in contract law?

It is unlikely to make performance radically different. Signup and view all the answers

What is necessary for a unilateral mistake to render a contract void?

There should be a genuine mistake regarding the identity of the other party. Signup and view all the answers

In the case of Cundy v Lindsay, which factor was crucial for the court's decision?

The identity of the party with whom the plaintiff intended to contract. Signup and view all the answers

What happens when a bona fide purchaser acquires goods that were mistakenly sold?

Only one party will be entitled to the goods, the other must seek damages. Signup and view all the answers

Which type of mistake does not generally affect the validity of a contract?

A mistake regarding the credibility of the other party. Signup and view all the answers

What was the primary argument of the plaintiff in Cundy v Lindsay to void the contract?

Mistaken identity of the contracting party. Signup and view all the answers

Which outcome occurred as a result of the court's ruling in the case of mistaken identity?

The contract was held void due to mistaken identity. Signup and view all the answers

What effect does the Competition Act 1998 have on contracts?

It renders unenforceable contracts that distort trade within the UK. Signup and view all the answers

In a case where a mistake is made about the identity for non-vital reasons, what is the typical legal result?

The contract remains valid and enforceable. Signup and view all the answers

What impact does a rogue's actions have on the relationship between an innocent purchaser and the mistaken party?

The innocent purchaser will take precedence over the mistaken party. Signup and view all the answers

Which of the following types of contracts are commonly considered illegal at common law?

Contracts that are sexually immoral. Signup and view all the answers

What is a primary reason that covenants in restraint of trade are typically void?

They are against public policy and inhibit economic activity. Signup and view all the answers

Under what condition can restraints of trade become enforceable?

If they are reasonable in geographical area and duration. Signup and view all the answers

Which employee group did NW Coaches Ltd likely have no legitimate business interest to protect?

Coach drivers. Signup and view all the answers

What kind of interest could NW Coaches Ltd argue they have in protecting their senior employees?

Trade secrets and goodwill. Signup and view all the answers

What defines a reasonable restraint of trade according to the context given?

A specified geographical area and appropriate duration. Signup and view all the answers

Why are certain contracts that challenge jurisdiction considered unenforceable?

They contradict public policy. Signup and view all the answers

What is the likely outcome if parties deal face-to-face and one party is impersonating another?

The contract is unlikely to be declared void for mistake. Signup and view all the answers

In written agreements, what determines with whom the innocent party intended to contract?

The explicit written terms of the agreement. Signup and view all the answers

What can indicate that a rogue is not addressed in the offer?

The requirement of a specific attribute that the rogue lacks. Signup and view all the answers

Which condition suggests that a contract with a rogue could be void?

The impersonated entity is a real entity known to the innocent party. Signup and view all the answers

What characterizes an illegal contract?

It involves the commission of a legal wrong. Signup and view all the answers

What is the general rule regarding illegal contracts?

They are void without recovery of benefits conferred. Signup and view all the answers

When might a contract be void for mistake in dealings?

When the written agreement names the wrong party. Signup and view all the answers

What is a valid reason for a contract to potentially be declared void for misrepresentation?

The rogue misrepresented their identity in a face-to-face scenario. Signup and view all the answers

What is the primary factor that dictates the reasonableness of a restraint of trade clause?

The status and seniority of the employee Signup and view all the answers

Which of the following circumstances would most likely lead to a restraint being considered unreasonable?

The restraint covers multiple geographical areas Signup and view all the answers

What must be proven for a covenant in restraint of trade to be enforceable?

It must cover a reasonable geographical area Signup and view all the answers

What is the legal standing of contracts that are deemed illegal?

They are typically unenforceable from the start Signup and view all the answers

How does the classification of a mistake affect the enforceability of a contract?

It can render the contract void if it precedes the agreement Signup and view all the answers

Which type of mistake is typically used as a last resort in legal arguments?

Unilateral mistake Signup and view all the answers

What happens if a covenant in restraint of trade is found to be unreasonable?

It becomes void and unenforceable Signup and view all the answers

What must exist for legitimate business interests to justify a restraint of trade?

Actual business interests that need protection Signup and view all the answers

Which of the following scenarios would likely render a contract void due to illegal performance?

A contract where both parties are aware of the illegal method of transporting goods. Signup and view all the answers

In the case of a speeding violation by a delivery driver, how does this affect the legality of the contract for delivery of goods?

The contract remains valid as the illegal act is incidental. Signup and view all the answers

What is the outcome when only one party is unaware of illegal performance in a contract?

The innocent party may enforce the contract. Signup and view all the answers

Which case illustrates the principle that a contract is not void if the illegal performance is incidental?

St John Shipping Corp v Joseph Rank Ltd Signup and view all the answers

How are contracts formed legally yet carried out illegally typically treated?

They remain valid unless both parties intended illegal performance. Signup and view all the answers

Which of the following elements is crucial in determining whether a contract is void due to illegal performance?

The knowledge both parties had regarding the illegal activity. Signup and view all the answers

What generally happens if both parties to a contract are aware of its illegal nature?

The contract is likely voided, preventing enforcement by either party. Signup and view all the answers

In what situation would a party be able to enforce a contract despite illegal performance?

If both parties are unaware of the illegality. Signup and view all the answers

Study Notes

Mistake and Illegality

Contracts can be void for mistake or illegality
A mistake may be fundamental, rendering performance impossible or radically different
Mistake must precede and induce the contract
Common mistake: both parties have the same fundamental mistake, e.g., subject matter doesn't exist
Cross-purpose mistake: parties misunderstand a crucial aspect
Unilateral mistake: one party is mistaken, e.g., mistaken identity
Example of common mistake: Bell v Lever Bros (1932) - mistake about breach of contract not fundamental
Example of cross-purpose mistake: Raffles v Wichelhaus (1864) - misunderstanding about ship's sailing date
Example of unilateral mistake: Cundy v Lindsay (1878) - mistake about identity of the other party

Illegal Contracts

Contracts can be illegal either at formation or due to performance
Illegal contracts concern a crime, statutory provision violation or public policy
Illegal contracts are generally void
Contracts involving committing a legal wrong are void

Covenants in Restraint of Trade

Clauses restricting activity post employment or business sale
Often prima facie void; can be enforceable if:
- Legitimate business interest to protect, e.g., customer relationships, trade secrets
- Restraint is reasonable:
  - Geographical area
  - Duration
  - Scope of prohibited activity
Example: NW Coaches Ltd - example of employee covenants

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Description

This quiz covers the principles of mistake and illegality in contract law. It explores different types of mistakes that can void contracts, including common, cross-purpose, and unilateral mistakes. Additionally, it addresses the implications of illegal contracts and their enforceability.