Mistake - Exam summary PDF

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Contract Notes- MISTAKE Relief under CCLA I. Relief for mistake is governed by the CCLA, which supersedes the common law. Note s 22(1) CCLA: ‘in place of’. II. Requirements are set out in s 24(1). 1. Mistake, s 24(1)(a) CCLA A. Definition of mistake (s 23(1) + (2), also 25(1). o Includes both per s 23 (1):  Mistake of fact: Past or present (exception re future conduct) (Compcorp). Includes mistaken beliefs.  Mistake of law: (which per s 23 (2) includes a mistake in the interpretation of a document).  Note: per s 25(1) this does not include a mistake in the interpretation of the contract. o If relevant: If both parties aware of a fact (e.g. a third party right) but have forgotten that fact when entering into the contract… o Mistaken belief => Mistake of fact within the meaning of s 23(1) CCLA (Slater Wilmshurst) o In order to be a mistake parties must have turned their mind to the topic at issue (NZ Refining). . Word ‘mistake’ implies you have given thought to it. o Mistake DOES NOT INCLUDE mistake in the interpretation of the contract, s 25(1) o Note Crighton, this includes: o Someone who reads the contract and misunderstands it o Does not read the contract but signs it on the basis of its general description/what someone has told them it means o Also note: Mistake in the interpretation of a guarantee as to the extent of one’s liability . As guarantees form part of the contract, s 25(1) applies- no relief under CCLA. . Objective approach: Follows from s 25 CCLA that contracts are to be construed objectively (Paulger) . Otherwise great legal uncertainty if a party could plead as a mistake that it understood the contract to mean something different from its ordinary meaning. B. Timing o CCLA applies only to mistakes made before or at the point the contract was entered into. C. Types of mistake 1) Unilateral mistake, s 24(1)(a)(i) CCLA: ‘A is materially influenced to enter into the contract by a mistake, existence of mistake known to the other party’  Example: A sells good to C, thinking that the person is B. C knows that A is mistaken and A would not have contracted with C if C’s true identity were known (mistake identity).  Knowledge  ‘Ought to have known’ not sufficient.  Actual knowledge of the mistake required at the point the contract was entered into (Tri-Star Customs)  However, possible to infer actual knowledge from proved circumstances.  Also note CCLA: mistake must be ‘material’ to the plaintiff. 2) Common mistake, s 24(1)(a)(ii) CCLA  Both parties suffer from the same mistake

3) Mutual mistake: different mistakes about the same matter of fact or law, s 24(1)(a)(iii) CCLA  Plaintiff makes a mistake + defendant makes a different one.  Must be able to identify: Objectively correct understanding of the matter, mistake of plaintiff, mistake of defendant.  Example: Purchaser believes they are buying a poodle, vendor thinks they are selling a spaniel, but dog is actually a lab.  Cross-purposes (now don’t fit into a category)  Conlon o Facts: O owns land which is divided into 4 lots. O uses lot 4 as a garden separated by a fence from the rest of the land. o O agrees to sell to C the land at the back of her house. o O means lots 1 to 3, whereas C means all four lots. o The parties sign an agreement which provides that lots 1 to 4 shall be transferred to C.  Unilateral mistake? No as mistake not known to C.  Interpreting contract objectively: Plain meaning of the written contract= objectively clear.  Not a common mistake by C + O.  Mutual Mistake: If this did apply, the requirement of knowledge on the part of the other party in regard to a unilateral mistake would be circumvented.  In short, section 24(1)(a)(i) CCLA would be made redundant.  In this situation: Where one party mistaken as to subject matter (understood in the same way an objective bystander would), and other claims to have acted under a mistake as to the effect of the comms- no mistake per s 24(1)(a)(iii). 2. Influenced  Mistake must be a material factor, but need not be the main reason for the parties having entered into the contract (Ware)  Can be other factors too. A. Affirmation of contract, s 26  Decision to enter into a contract is not influenced by mistake if party is aware of it. B. Inequality of value, s 24(1)(b)  Mistake must have had substantial consequences.  Substantial within the meaning of s 24 means 10-15% difference in value. C. No assumption of risk of mistakes, s 24(1)(c)  Assumption must be specific in order to rely on it (Prattley) Relief  If s 24 is satisfied, per=> S 23(4) (‘There is a contract’), the court has a wide discretion to make orders.  Thus, whilst the court ‘may’ cancel the contract, not guaranteed they will- at the discretion of the court.  In particular, per s 28(2):  Declare the contract valid, cancel the contract, vary the contract, compensation.  Transfer property, s 28(3)  Per s 27: Must take into account who caused the mistake.  Note: S 31: Bone fide purchaser (having acted in good faith) retains property rights. Non est factum  mistake. A. Requirements 

S 22 (3)(a): The doctrine of non-est factum provides an alternative remedy to

Set out in Keeman

1. The person raising the plea (the proponent) must have signed the document believing it to have a particular character or effect 2. The document must in reality have a radically different character or effect  Thus creating a wholly different result from that which was understood by the proponent. (Jenkins)  ‘Radically different’:  Example: an extension of an option is radically different from a receipt (Petelin)  Counterexample: the proponent has appreciated the legal nature of a document (e.g. transfer of ownership) and is mistaken only as to its contents, unless the mistake is fundamental (Gallie).  Causality  The proponent’s mistaken belief must have resulted from an erroneous explanation or description of the document given to him by someone else. 3. The proponent must show that he acted with reasonable care  Doctrine applied where: A deed was read to a person who could not read and the reading did not correctly state what was in the writing.  Whether the proponent was justified in believing what he was told by the other party depends on whether it would have evoked a reasonable person’s suspicions  Doctrine not applied: Proponent did not take steps to understand the document before signing, such as seeking independent advice, unless there were good reasons for not doing so  If defendant cannot speak English => Should ask someone else to explain the document to him (Liang)  Also note: Must distinguish between cases where non est factum is raised against:  An innocent party and where it is raised against a party that was at fault in causing the mistake (Landzeal). B. Consequence  Contract is cancelled, parties are not bound by it. (not discretionary!)  Even if the subject matter came into the hands of an innocent third party, that innocent third party could acquire no rights. Doctrine of rectification  Doctrine of rectification also provides an alternate remedy to mistake (s 22 (3) (b)).  Applies where: Parties have agreed orally on a contract, which is then inconsistent with the written agreement. Courts can rectify the written contract to be consistent with the oral agreement. A. Requirements (Westland Savings Bank, Hancock)  Per Joscelyne: A.Parties drew up a written document B. Intention continued at the time of the execution of the agreement C. By mistake, the written document fails to reflect that common intention A.If requirements met: the court may order the mistaken portion to be struck out and replaced with words that do reflect what was actually agreed B. Note: o Timing: Mistake must be in the reduction of the agreement into writing (not at formation). B. Other bars: rectification not available if . Document accurately records what was agreed on even though the agreement itself was based on a mistake (Frederick). . The plaintiff has delayed abnormally in seeking the remedy . The contract can no longer be performed . Subject matter has been acquired by a bone fide purchaser for value. C. Burden of proof . On the party seeking relief (South Island Deepwater Fisheries) . There must be clear evidence that

A. B. C. .

There was a common intention The document to be rectified does not accord with what was intended In its rectified form it would High burden, as obviously no written evidence, however oral evidence can be admitted to establish the antecedent intention/agreement . The court may look at the parties’ post-contractual actions as evidence of what they had agreed (Murland) A. The fact that a party has acted as if the document stood in the form to which it is sought to be rectified is evidence of the existence of an intention on the part of that party to contract in those terms (Dudding) D. Unilateral mistake . Rectification not available for a unilateral mistake of which the other party had no knowledge, (Wrightson) . If one parties intention incorrectly recorded, rectification only available if the other party is aware of the situation (Laurence) 1. Requirements for rectification in case of known unilateral mistake (Thomas Bates)  The plaintiff erroneously believed that the written document gave effect to the parties’ previously agreed common intention  The defendant knew that it did not and that the relevant omission was due to a mistake on the plaintiff’s part  The defendant failed to draw that mistake to the plaintiff’s attention before executing the document  The mistake would either benefit the defendant or be detrimental to the plaintiff. 2. Burden of proof (Roberts)  Applicant must show  That agreement was intended to include the beneficial term and  The defendant allowed the written contract to be executed without it  Knowing that the applicant was ignorant of the omission...