Contract Law Multiple Choice Quiz

Mistake in Contracts

• A voidable contract is a contract under which a party has a right to rescind it; it remains valid until the party exercises that right.
• A void contract is automatically of no effect from the beginning and is a complete legal nullity that does not confer any rights on the parties.

Types of Mistakes

• Common mistakes may arise in different forms except mistake as to the quality of the subject matter of the contract.
• Mistakes can be classified into unilateral, mutual, and common mistakes.
• Unilateral mistake is a type of mistake where only one party to the contract is mistaken.
• Common mistake arises when both parties share the same mistaken assumption.

Cases and Remedies

• In Amalgamated Investment and Property Ltd v John Walker, the court emphasized that for a mistake to have any legal effect on a contract, the mistake must have existed at the time the contract was concluded.
• In Philips v Brooks, where the parties deal with each other face to face with one party fraudulently misrepresenting himself to be another existing person, there is a strong presumption that the offeror intended to contract with the person who was physically present and none else.
• Rectification is an equitable remedy that may be given when an agreement which has been reduced into writing and owing to a mistake shared by both parties does not reflect the intentions of the parties as revealed from the previous parole agreement.

Consequences of Mistakes

• In equity, mistake operates in various ways, except that mistakes may be a reason for the contract to be effective.
• Mistake may be a defense in an action for specific performance.
• Mistakes may entitle the parties to have a written contract rectified.
• Mistakes may also be grounds for the rescission of a contract.

Specific Cases and Examples

• In a case where A bought a picture from B, both believing it was painted by Constable, but it was later discovered that it was not, the court is likely to opine that there was no mistake at all about the subject matter of the sale to make the contract void.
• In Denny v Hancock, the court refused to grant specific performance where the purchaser's mistake over the boundary of the property being sold at auction had been caused by an innocent mistake on the vendor's part.