Mistake

If both parties to an agreement enter imto it under some misunderstanding or misapprehension , in certain circumstances the law will permit them to allege that the contract is defective, on the ground that if they had known the true facts, they would never have entered into the agreement

Mistake under English law

Mistahe is devided into 3 categories: 1) Common mistake 2) Mutual mistake 3) Unilateral mistake

Common mistake
Both parties are mistaken on the same matter i.e. the fundamental fact to an agreement Eg. Mistake as to the existence of the subject matter

Bell v Lever Bros Ltd [1932] AC 161 - mistake as to the nature or quality of the subject matter Bell was employed by LB ltd as a director. After 3 yrs, LB terminated Bells services and paid him compensation. After the payment, LB found out that Bell had breached his responsibilities as a director by doing certain w/ful acts which would entitle the company to dismiss him without any compensation claimed for the return of the money on the basis of mistake

 HOL: Mistake regarding the legal relations btw the parties was merely related to the quality of its subject matter, and was not of such a fundamental character as to constitute an underlying assumption without which the parties would not have entered into the agreement contract not void

Mutual mistake
Both parties misunderstood each other and at cross purposes Raffles v Wichelhaus [1864] H & C 906 2 parties agreed to a sale of a cargo of cotton arriving in London by a ship called The Peerless, sailing from Bombay. But unknown to both parties, there were 2 ships of the same name both sailing from Bombay at different times. Held: They were both negotiating under a mistake and had in mind different ships. Therefore the contract was void for mutual mistake

Unilateral mistake
Only one party is making mistake and the other party knows about it. Eg. Mistake as to the true identity of the other contracting party Hartog v Colin & Shields [1939] 3 All ER 566 An offer was accepted to sell certain Argentine hare skin at a certain price per pound. In the negotiations, however, there was an understanding that the skins were quoted at a price per piece. Held: The contract was void for mistake.