Mistake This area of contract law is concerned with situations where a contract may be regarded as never having come into existence or the contract is brought to an end as a result of a mistake by either or both parties. À The rules here are onerous and impose heavy burdens on a party arguing mistake. À However, contract law principles support the enforcement of the true intentions of contractual parties. À Therefore, a balance has to be struck. Categories of mistake 1. Common Mistake (failure of a basic contractual assumption)- Mistake is as to a common assumption of fact 2. Mutual Mistake (communication mistake) - Mistakes negativing agreement (ie parties appear to be in agreement, but are not). 3. Unilateral Mistake (mistake known to one party)- (ie one party takes advantage of the other's mistake). Common mistake À Mistake of both parties as to a subject matter that is fundamental to entering the contract. À Parties are in agreement but the contract is impossible to perform. Examples: · Subject matter never existed or no longer exists (Res extincta) . Couturier v Hastie (1856) 5 HLC 673 · Buyer got corn shipped from Greece to England. Unknown to the parties, that the corn was sold at the time of contracting by the captain of the ship because the corn had gone bad. . Seller argued for payment on grounds that he had an interest in the adventure, where the document (bill of laden) will be delivered, and it will then be used to claim the good. Also, the policy of insurance which will be used to claim from the insurance company if the goods did not arrive.
. Held: In favour of the buyer. Question on whether the contract was void did not arise. . This case is not an authority for cases where the contract is void in situations where goods were non-existent at the time of contracting without the knowledge of parties. Sec6 sale of goods act 1979 . Where goods without the knowledge of the parties had perished at the time of contracting, contract will be void. · Goods would need to have been in existence at one point, but perished at the time of contracting, without the knowledge of both parties. Where one party takes responsibility for the non-existence of good . 'Where a seller with all the means of knowledge asserts the existence of a thing to the buyer, whom they know have no knowledge, but the thing was not existent at the time of contracting, the court will give effect to the express undertaking. . McRae v Commonwealth Disposals Commission (1951) 84 CLR 377 . Plaintiff won a tender to rescue a tanker in distress. Plaintiff prepared for the salvage, but discovered that there was no ship at the location. . Defendant refused to pay for the expenses incurred by the plaintiff on the grounds of common mistake since they both believed there was a ship to be salvaged. . Held in favour of