Deck 6: Mistake

Question 1

A contract party can void the contract for common mistake even if she has induced that mistake.

Answer 1

False

Question 2

What is the significance of Great Peace Shipping Ltd v. Tsavliris (International) Ltd (2002) for the doctrine of common mistake?

A) It followed Steyn J's dictum in Associated Japanese Bank v. Credit du Nord (1989) that, alongside common mistake at common law (which renders a contract void), there exists an equitable remedy for common mistake where the common law remedy is unavailable (which renders a contract voidable).
B) It rejected Solle v. Butcher (1950), which means that, alongside common mistake at common law (rendering a contract void) there exists no equitable remedy to render a contract voidable.
C) It rejected Bell v. Lever Bros (1932) and affirmed Solle v. Butcher (1950), which means that there is no common law remedy for common mistake and only an equitable remedy which renders a contract voidable.

Answer 2

B

Question 3

Which of the following contracts is void for common mistake?

A) Peter plans to attend an electronics convention in Hull and books a weekend stay at the Goodnight Hotel. When he arrives in Hull, he discovers the convention had been cancelled before he made his booking.
B) Roger lives in his aunt's apartment. When she dies, her daughter agrees to sell the apartment to Roger. Unknown to both of them, the aunt has bequeathed the property to Roger in her will, but this will only surfaces after Roger and the daughter have contracted.
C) Quentin buys tickets to a concert in London taking place next week. The following day, the concert hall burns down.

Answer 3

B

Question 4

The Thai government begins a tendering process for concessions to search for oil or gas deposits. A promising location between the Thai-Malaysian border is described as: 'In Thai waters, 1 mile offshore from the mouth of the Golok River'. United Petroleum Co (UP) tender successfully for the concession and embark on a costly undertaking to find oil reserves. After six months, the work is brought to a halt by the Malaysian government, who cite a border dispute that is pending at the International Court of Justice. The Thai government made no mention of this to UP, believing the area to fall within its territory. The successful exploitation of the site would have generated high revenues for UP and has only left them with enormous costs. What should UP argue before the courts in order to recoup its investments from the Thai government?

A) That the contract is void for common mistake at common law.
B) That the contract is voidable for common mistake in equity and should be set aside on terms.
C) That the Thai government (a) assumes the risk for this mistake, and so is in breach of contract, or (b) has induced UP's agreement by misrepresentation.
D) That the mistake was a mistake of law and therefore cannot void the contract.

Question 5

A contract void for common mistake may be kept alive by the contract parties through affirmation.

Question 6

What will be the consequences if A sells a particular item to B under a fundamental common mistake and B subsequently sells that item for value to a third party C, who is unaware of the mistake?

A) A will be barred from invoking the doctrine of mistake and the item will remain with C.
B) The item will remain with C, but B will have to transfer the price he received for the item from C to A.
C) A will be allowed to repossess the item from C.

Question 7

Which of the following statements is false?

A) A unilateral mistake as to the identity of the other party will always void a contract.
B) A party cannot accept an offer intended for someone else.
C) Where a party mistakes the other party for a non-existent or unidentifiable party, the contract may be void for mistake if the party additionally believes that the other party exists.

Question 8

Compurite Co specializes in the lease of office and computer equipment to companies. ReCompute Co sells second-hand computer equipment. In which of the following situations is Compurite not able to void the contract for unilateral mistake and reclaim its goods from ReCompute?

A) Infovast Co, a small new business operating an internet search engine, orders 50 computers for lease from Compurite. Infovast employs a logo that starkly resembles that of Infofast Co, a large telephone search directory which Compurite supplied two years earlier and had called earlier in the month to enquire about renewing its equipment. In order to pay its debts, Infovast sells the computers to ReCompute.
B) Walton, a fraudster, orders 50 computers under a fake company name, 'Futurfax Co'. He immediately sells the computers to ReCompute Co.
C) Jonas comes to the sales office of Compurite and claims he is William Stockton, the new sales officer for Gower Motors Co. When filling out a lease application for 50 computers, he produces as proof of identity a forged driver's licence. A copy of this licence is faxed to a credit institution and everything checks out okay. Jonas immediately sells the computers to ReCompute.
D) Compurite can void the contract for mistake in all three situations above and reclaim the computers from ReCompute.

Question 9

Anders, a Danish tourist, is visiting London for the weekend. Anders bears a striking resemblance to David Beckham. Although no one seems to realize it in Denmark, in London, he is often mistaken for the star footballer. In which of the following situations can the contract be voided and can B recover the goods from D?

A) Anders sees a pair of trainers he wants to buy. At the till, the store manager, Bob, says: 'For you, Mr Beckham, it's half price'. Later that weekend, Anders sells the shoes to David who works at his hotel.
B) Anders picks out a DVD in a shop next to his hotel. At the till he realizes he has left his wallet in his room. Anders asks the store attendant, Barry, whether the bill could be sent to his hotel room, saying 'Just ask for David Beckham'. Barry agrees and sends the bill to the reception. Before leaving, Anders forgets to pay the bill. He gives the DVD to Diana, the receptionist, in return for her half empty pack of cigarettes.
C) Anders sees a vintage Mini Cooper which is for sale. He calls the owner, Beatrice, an elderly widow, and they agree to meet. Since Anders' bank is overseas and cannot get the money immediately, he asks Beatrice if he can buy the car on credit. To reassure her, Anders says: 'You can trust me, I'm David Beckham'. Beatrice has never heard of David Beckham and inquires at her local police station. The officer on duty, taking Beatrice for an inquisitive old lady, replies: 'Mr Beckham's very rich, he plays football abroad'. Beatrice agrees to let Anders have the car. When Anders realizes how expensive it is to ship the car to Denmark, he sells it to Donald without ever paying Beatrice.
D) None of the options given is correct.

Question 10

Where a party complains of a mistake as to what was agreed, the starting-point is whether the objective test of intentions for contract formation is satisfied.

Question 11

Alessandro needs to raise money quickly in order to save his business from bankruptcy. A friend of his tells him of an investment which promises big returns and cannot go wrong. In a moment of weakness he decides to get his aunt, an illiterate elderly widow, who only speaks Italian, to sign a deed transferring the property of her house to him by telling her that she is merely witnessing his signature in relation to a business deal. In order to secure the money needed for the investment, Allessandro mortgages the house to a bank. The investment turns out to be a failure and Allessandro is unable to pay off the mortgage. The bank seeks to repossess the house from his aunt. Can the aunt prevent the bank from evicting her?

A) No, a signature is at all times binding. The bank may take possession of the house.
B) No, the bank has acquired rights innocently and for value.
C) Yes, the aunt was mistaken as to the nature of the document she signed.
D) Yes, the contract is voidable for misrepresentation.

Question 12

Superstores Co is looking to lease business premises from Fuller Properties Co. After lengthy and drawn out negotiations, the parties agree the rental price will be £54,000 per annum for a minimum lease of five years. Fuller's solicitors are asked to draw up the contract. Accidentally, one of their secretaries types out the purchase price as £45,000. Fuller signs the document and sends it to Superstores. They sign the document without noticing the error. A year later, Superstores encounters financial difficulties and is unable to pay the full rent. Looking for a way out of the contract, they encounter the mistake. They contact Fuller and offer them £36,000 for the second year's rent (being the recorded contract price of £45,000 set-off against the amount they overpaid the first year £9,000). Can Fuller Properties collect the originally agreed contract price of £54,000 for the second and remaining years?

A) Yes, they can ask a court to correct the mistake and claim the outstanding amount.
B) No, a party is bound by its signature.
C) No, according to the objective test of intentions, the contract price is the price recorded in the contract.
D) No, according to the parole evidence rule, a written contract exclusively embodies the agreement. No outside evidence can be used to vary it.