CONTRACT-MISTAKE ALL ANSWERS

Q1)
Farouq meets Gerardo for the first time at a business meeting on 1st April and agrees to buy
Gerardo's car from him for £10,000. Advise Gerardo as to his contractual obligations in the
following alternative circumstances in the light of the different mistakes made by the party or
parties: (a) Gerardo was late for the meeting on 1st April and so parked his car in a hurry and ran
to the meeting. This was seen by the police who suspected it might contain a bomb. The car was
destroyed in a controlled explosion. Gerardo heard a loud bang as he entered the meeting but
thought nothing of it. (b) Gerardo intended to sell his old jeep but Farouq intended to buy the
sports car he had watched Gerardo park. Gerardo was NOT aware of Farouq's mistake. (c)
Gerardo intended to sell his old jeep but Farouq intended to buy the sports car he had watched
Gerardo park. Gerardo was aware of Farouq's mistake. (d) Both Farouq and Gerardo believe
Gerardo's car has a three litre engine. It actually has a less powerful two litre engine. (2018 Zone B)
(A)
We understand that G’s car has been destroyed by the police and unbeknown to G and F, the contract of
the car has been concluded. Whilst there is a mistake on the basis of which the contract was entered into,
the first issue which we need to determine is whether the operative mistake is unilateral or bilateral. Since
both parties think that the car exists, it is a bilateral mistake. Accordingly, the second issue is to determine
whether the bilateral mistake is a common law mistake (i.e. the nature of the mistake is same) or cross
purpose mistake (i.e. the nature of the mistake is different). Since both parties are harbouring under the
same mistake which is the existence of the car, it is a common mistake and it will fall under the category
res-extincta which means that the mistake is regarding the existence of subject matter (Scott v. Coulson).
For this mistake to render a contract void, the subject matter has to perish but has to be guaranteed under
the contract and not be left on chance as clearly mentioned in McRae case which is an Australian case
which has persuasive value. In our case, it was very clear that the car existed therefore the contract will be
held void.
In addition to the above, as this was a sale of goods contract, we would also like to mention that pursuant
to Section 6 of the Sale of Goods Act, 1978, if in a sale of goods contract, the subject matter perishes
before contract formation then the contract will be held void. This is another way through which this
contract will be void.
(B)
We understand that G wants to sell his jeep but F wanted to buy the sports car which he saw G park. We
note that both parties are mistaken (bilateral mistake) as F thinks he is buying a sports car and that is what
G is selling and G thinks that F wants his jeep and he intends to sell that only. We also note that the
mistake of both parties is different in nature (cross purpose). Accordingly, relying on Raffles v.
Wilkenhaus, the contract will only be held void if an objective bystander (third party) who is listening /
reading the conversation between the parties cannot contemplate what the parties were trying to contract
for. Then only the contract will be held void.. In our case, assuming that the word “car” was used in the
conversation then applying the reasonable third party test, a car is only reserved for a sedan/sports car and
not for a jeep which is a different category of vehicle. We also note that G in the context was also driving
his sports car and not his jeep. Any reasonable person who is listening to the conversation and looking at
what G was driving will come to a safe conclusion that the contract was for the car and not the jeep
(assuming that the price differential was not much).
Under understand that G wanted to sell his jeep and F wanted to buy his sports car and the contract was
concluded and G knew about F's mistake. Clearly the mistake is unilateral in nature as G was aware and F
was the only mistaken party. The mistake in this case is a mistake of terms. The law of which was set out
in the case I of Smith v. Hughes and applied in multiple cases such as Hartog v. Collin Shields. The
contract will only be held void if the non- mistaken party (i.e. G) subjectively knew about the mistake or
the mistake was so obvious that he reasonably ought to know about it but did not point it out. In our case,
the facts clearly state that G subjective knew of F's mistake therefore the contract will be held void.

(d)
We understand that F and G both mistaken believe that the car has a three litre engine whereas it only has
a two litre engine. The mistake is clearly bilateral and both parties are harbouring the same mistake (i.e.
common). The mistake is regarding the engine capacity which will fall under a mistake of quality. The
law in this regard is extremely narrow. Initially, it was held in Bell v. Lever Brothers that the contract will
only be held void for mistake of quality if the performance is “essentially different. This was further
narrowed in the Associated Japanese Bank case wherein the words “essentially and radically different
were used. However, the present law is set out in the Great Peace Shipping case where the courts held that
the contract for quality mistake will only be held void if the quality is so different that the basic purpose
of the contact is not achieved. The law is very narrow in terms of interpreting “basic purpose”. The
application of this was seen in Leaf v. International Galleries where as fake painting was sold in place of
an original and both parties were unaware. There was a vast price difference and when the buyer found
out and initiated a case, the courts famously stated “you wanted a painting, you got a painting” and the
contract was valid. In our case, the basic purpose of a car is to move from A to B. This can be done with a
two litre engine as well. Therefore, as the basic purpose is being achieved, the contract will be valid.
ALTERNATIVE
Summary of Facts
We understand by the facts of the case that Gerardo and Farooq have entered into a contract. We have
been provided with multiple alternative circumstances where each situation contains an element of
mistake. The general rule in this regard is that a mistake renders a contract void abinitio i.e. void from the
beginning. However, whether these contracts will be valid or void will be discussed below where we shall
solve each case separately.
(A)-the primary issue in this case is to determine whether the mistake is bilateral or unilateral. For the
sake of clarity we shall define both. A bilateral mistake is where both the parties are at mistake whereas a
unilateral mistake is where one party is at mistake. We note that in our case Gerardo was at a mistaken
belief that his car is parked outside while Farooq is also at a mistaken belief that the car is parked outside
therefore it is a bilateral mistake.
The secondary issue is to determine the category of bilateral mistake applicable in our case. A cross-
purpose mistake is where the nature of the mistake is different while a common law is where the nature of
the mistake is the same. Since, both the parties regarding the car being parked outside it will be a common
law mistake. It is evident that both the parties were mistaken regarding the existence of subject
matter(also known as Res Exincta) therefore the contract will be void. Alternatively, Section 6 of SOGA
is applicable to make the contract void since the car once existed and was subsequently destroyed.
(B)- we note that Gerardo is at a mistaken belief that his jeep is being sold while Farooq is at a mistaken
belief that he is buying a car therefore it is a bilateral mistake. Since the nature of the mistake is different
it will be classified as a cross purpose mistake therefore the courts will apply the objective bystander test
where the courts will act as a third party observing the conversation of the contracting parties and if the
courts can conclusively decide what the contract is about then the contract will be valid and vice-versa. In
our case the parties particularly used the word car while forming the contract therefore the contract will
be valid for the car.
(C)-According to the facts Gerardo was aware of Farooq’s mistake therefore it is a unilateral mistaken
and since the mistake falls regarding one of the provision of the contract it will fall under the ambit of
mistake as to terms. Pursuant to the fact that Gerardo of the mistake and failed to point it therefore the
contract will be void.
(D)-it is noted that both the parties are mistaken regarding the capacity of the engine therefore it is a
bilateral mistake and since the mistake is regarding one of the characteristics of the subject matter it will
be classified as mistake as to quality. The relevant case in this regard is Great Peace Shipping which
clearly states that if the basic purpose of the contract is being achieved then the contract will be valid. We
note that the basic purpose in our contract is being achieved therefore the contract will be valid.
Q2)
Cyril Hedge, a financier and well known customer of Nichollod’s Stores, needs to leave London for
a period of time to tend to his business. He hires Peter Dastardly, on the recommendation of a local
employment agency, as a caretaker at his Chelsea home whilst he is abroad Dastardly uses Hedge’s
email account to send a message to Nichollod’s and describing himself as Hedge, arranges to have a
home entertainment system priced at £5,000, delivered to Hedge’s Chelsea address. When the
system is delivered, Dastardly takes it in and then sells it to Shady, a second-hand electronics dealer
near Oxford Street Shady is unaware of how Dastardly obtained the system and displays it in his
window A Nichollod’s employee notices the system and Nichollod’s seeks the return of the system
from Shady Advise Shady To what extent, if any, would your answer differ if Dastardly had visited
Nichollod’s Stores to arrange the purchase of the home entertainment system
Summarize the facts
We understand that Peter has pretended to be Cyril Hedge and has emaled Nich through Cyril’s email to
order a home entertainment system and thereafter sold the same to an innocent party Shady. We need to
determine whether N can claim that the contract (if formed) for the home entertainment system will be
held void or not using the law of mistake.
Uni or Bi
In order to rely on the law of mistake, the first issue is to determine whether the mistake is unilateral (i.e.
one party is mistaken) or bilateral (i. e. both parties are mistaken). In our case, Peter clearly knew he was
not Cyril so the mistake was only on part of Nich.
The second issue is to determine whether the operating mistake is re garding terms of identity of the
person. Clearly the case is of mistaken identity. Therefore, in needs to be determine whehther the contract
that was formed was with Peter or Cyril and whether ot can be rendered void. In this regard, issue is
whether the inter presentis rule will aplly or inter absentis (define BOTH). In our case, since the entre
contract was formed through email, relying on the absentis rule, the contract will not be with peter but
rather Cyril and whilst Peter was given the home entertainment system, the title of the good was
transferred to Cyril the contract wil be jheld void, the title will revert back to Nicholads and therefore
Nicholds will keep the home entertainment system.
Alternative. If Peter would have gone physically to purchase the ES under the guise of Cyril the presentis
rule defined above would apply and the contract would be with Peter rather then Cyril – the titel will also
pass to Peter and he can pass the title to the innocent party and the contract will not be held void therefore
the innocent party will keep the goods.
Q3)
Suggs visits Marlow in response to an advertisement placed by Marlow about the sale of his grand
piano for £15,000. Suggs is posing as Felix, a wellknown YouTube star; the resemblance is
remarkable. Suggs offers Malaw £10,000 for the piano. Despite the reduced price, Marlow wishes to
accept the offer because he thinks that it would be exciting to sell to such a star. Suggs presents a
cheque for £10,000. He has stolen this from Felix and fraudulently signed it in Felix's name. In an
attempt to falsely prove his identity to Marlow, Suggs shows him a short YouTube video on his
smartphone featuring Felix. Marlow accepts Suggs' offer and allows Suggs to take the piano away
in his van. Suggs immediately takes the piano to Arias, a dealer, and sells it to them. A few days
later, Marlow is contacted by his bank and informed that the cheque is worthless. Depressed by this
news, Marlow goes out to cheer himself up. He sees a sign in the window of his favourite music shop
offering for sale a guitar that was owned by Brian Carferry. a famous singer and songwriter. The
price is advertised at £30. Marlow rushes in and buys the guitar, arranging for it to be delivered to
him the next day. However, the shop later refuses to deliver the guitar, telling Marlow that their
new sales assistant mistakenly put the wrong price tag on the guitar. Advise Marlow. (2019 Zone B)

Summarize the facts –

We understand that Marlow has entered into two contracts, the first is for sale of his piano to Suggs who
was posing as Felix whereas the second contract is for the guitar with a shop. Both contracts arguably
have been entered into by virtue of a mistake therefore we need to determine whether the contract can be
held void under the law regarding mistake. We shall discuss each contract separately
(a) Contract of Piano
Uni or Bi -
Terms of Identity -
Inter presentis or inter absentis
In our case, as the contract was formed face to face, the inter presetis rule cleaerly states that the contract
will be formed with Suggs and not with Felix and the piano with the title will be transfer to Suggs who
can transfer it ot the innocent party therefore Marlow will not get the piano back
(b) Contract for guitar
Uni or Bi-in our case, the shop keeper has made a mistake re the price tag and marlow just purchased it
accordingly therefore the operating mistake is only on part of the shop keeper ile. Unilateral.
Terms define
In our case, Marlow had no idea subjectively that the shop keeper had made a mistake. However, any
reasonable person “ought to know” that if there is a guitar and that too signed by a famour singer it cannot
possibly be worth so less i.e. 30 pound which may not even be equalvalent to a normal guitar. Therefore
Marlow should have pointed this out before buying it and as he did not the contract will be held void.
Alternative answer
Summary of Facts
We understand that Marlow (“M”) has sold his piano to Suggs (“S”) who was posing as Felix (“F”) and S
has thereafter sold the piano to Arias (“A”). We need to determine whether the contract is formed for the
piano and if it can be held void under the law of mistake. We further understand that M has entered into a
second contract with a music shop to buy a guitar and we need to also determine if this second contract
will be valid or void. We shall discuss each case separately.

Contract for Piano

As regards the Piano, M was clearly operating under a unilateral mistake of identity as S posing a F. The
first issue is to determine whether the inter contract is formed through non-physical means i.e. email, fax
etc. and the contract is not formed with the fraudster but rather with the existing person who the fraudster
was posing as and the title goes to the existing person but the fraudster gets the physical goods.
Accordingly, the fraudster can only pass on the physical good but not the title to the innocent third party.
The contract will be held void, title will revert to the original party who will get the goods back (Shogun
Finance v. Hudson) (Cundy v. Lindslay). Inter presentis applies where the contract is formed face to face
and the contract is formed with the fraudster and not the existing person. Accordingly, the fraudster gets
the title, the contract is not void and the third party gets the title and keeps the goods (Lewis v. Avery)
(Phillip v. Brooks). In our case, the contract for the piano was made face to face and according to inter
presentis rule, the contract will be with S who will get the title and pass it on to the innocent party A who
will keep the piano.
Contract for the Guitar
We understand that M has contracted for a guitar which was mistakenly put up for sale for 30 pounds.
From the facts, its’ clear that there is a unilateral mistake on part of the shopkeeper and such mistake is
regarding terms of the contract i.e. the price. For unilateral mistake of terms, the contract will only be
held void if the non-mistaken party i.e. M knew or reasonably ought to know (i.e. obvious mistake) that
the first party was mistaken and failed to highlight the mistake (Smith v. Hughes) (Hartog v. Collin
Shields). In our case, M did not know but it is very obvious that a guitar from a famous personality cannot
be priced at only 30 pounds as these are collector items which are usually priced with a premium.
Therefore the contract will be held void and the shop does not have to deliver the guitar to him.
Q4)
Andrew sees a gold teddy in the jewellers owned by Zeeshan, and remembering the one he had as a
child but had lost last year, buys it. When he shows his mother the teddy she recognises it as the one
he lost Enjoying history Andrew decides to visit Clare Castle and enjoys the day. Andrew wants to
remember the day and while he is sitting in the garden he begins talking to a gentleman who
introduces himself as Lord Clare. In fact it is a ‘look-a-like” Charlie Cheek, who seeks out gullibie
visitors. Andrew asks Lord Clare to sign his autograph book and is delighted when Lord Clare
offers to sell him a vintage seal of be family. Andrew has no money but ‘Lord Clare’ agrees to
accept Andrew’s watch in exchange. Andrew is delighted and hands over the watch. He later sees
his watch in the local second hand shop, which he thinks unusual as “Lord Clare was so keen to
have it. Andrew then visits the shop and sees a painting of the Castle which he believes is an
original – it is infact a print. He pays for the picture and is pleased as tge price was very Reasonable
for an original picture of Clare Castle. He has now discovered that the seal is worthless and that the
picture is in fact a print. Andrew wants to return the picture, reclaim his watch from the second
hand shop and get his money back from Zeeshan for the gold teddy. Advise Andrew
Summary of Facts
We understand that Andrew has entered into three different contracts namely for buying the teddy from
Zeeshan, buying the vintage seal from Charlie Cheek who was pretending to be Lord Clare and buying a
fake painting from a gift shop. All these contracts are based on an operative mistake on part of Andrew
and we need to determine whether the contracts will be held void based on the law of mistake. We would
like to highlight that mistake renders a contract void and should be before the contract. This is based on
the theory that contracts should always be formed if there is meeting of minds and if a party is entering
into a contract due to a mistake, there is no meeting of minds, therefore the contract should be invalidated.
Since, there are multiple contracts, we shall discuss each case separately:
A-Andrew
We see that Andrew has bought a gold teddy from Zeeshan which was actually owned by him as he had
previously lost it. As both the parties mistaken think that the teddy is owned by Zeeshan but actually is
owned by Andrew. This is clearly a bilateral mistake and as the nature of the mistake is the same, this will
be considered as a common law mistake of ownership (Res Sua). A similarly scenario was seen in Cooper
v. Phibbs where a person had bought land from another person which was actually owned by him - the
courts rendered the contract void. Even in our case. the contract between Zeeshan and Andrew will be
void and Zeeshan will have to return the money and Andrew will keep the teddy as well.
B- Contract for the Vintage Seal
We see that Andrew has sold his watch for a fake seal to a fraudster named Charlie Cheek who was
pretending to be Lord Clare and has further sold the watch to a shop keeper. In order for Andrew to claim
the watch back from the shopkeeper, he will have to render the contract void for mistake so he gets the
title of the watch back. Since there is a unilateral mistake of identity on part of Andrew, we need to first
determine with whom the contract was formed i.e. Lord Clare or Charlie Cheek. In such situations, the
courts have developed the concepts of inter absentis and inter presentis. Inter absentis applies where the
parties are dealing through non-physical means such as emails, telex etc, then the contract and title passes
to the existing person or business under whose name the fraudster is operating – the contract is held void
for mistake and the title reverts to the innocent party who gets to keep the goods. Inter presectis applies
when the contract is made face to face. In which case, the contract and title passes to the fraudster who is
physically present and not to the existing person the contract is valid and the fraudster can pass the title to
any third person who will keep the goods
In our case, the contract was clearly formed face to face therefore the title and contract will be with
Charlie Cheek – the contract will be valid and Charlie Cheek can pass the title to the shop keeper who
will keep the watch
C- Contract for Painting
We see that Andrew has bought a painting thinking its original but turns out it was a print. Since there is
no evidence that the shop keeper was also mistake, we assume that the shop keeper would definitely
know that he was selling a print of the painting. Therefore, in the context, there is a unilateral mistake as
to terms of the contract i.e. whether the painting was original or a print. For unilateral mistake as to terms,
the contract will only be held void if the non-mistaken party either knew or reasonably ought to know (ie.
Obvious mistake) of the mistake but failed to point it out. In our case, the shopkeeper did not subjectively
know about Andrews mistake and neither was it an obvious mistake as he paid the price which was kept
for the print and did not say anything to the shopkeeper therefore the contract will not be void and
Andrew will have to keep the print.
Q5)
Julie provides exclusive make-up, many of the transactions being over the internet to International
clients. Mildred has been in email contact with Julie showing interest in the Whole Bodycare Range.
Mildred claims to be a famous body-double actress (Hellie Wainrite) who needs the makeup for her new
blockbuster film part. Julie thinks this will be good marketing for her products and after research on the
internet realises this could be very good for her business. Mildred arranges by telephone to visit Julie's
showroom saying she wants to buy every item in her Whole Bodycare Range at a total cost of £8,000.
When Mildred arrives, she offers to pay by credit card. The name printed on the credit card is Hellie
Wainrite. Mildred explains to Julie that she is near her credit limit and so pays a deposit of £3,000 by
credit card and promises to pay the outstanding amount later that day. Keen to make the sale, Julie lets
Mildred take the makeup with her in its large presentation box. Unknown to both, the presentation box
actually contains the Male Beauty Kit. Mildred then takes the unopened box to Noor, a local beauty shop,
and sells it to her for £2,000 and disappears. The credit card is later declined by the bank as it was
reported stolen and Julie has seen the presentation box on display at Noor's shop. Advise Julie on any
claims he may have against Noor.

Summary of Facts
We understand that Julie has sold her Whole Bodycare Range make up products to Mildred who is a
fraudster and is posing to be Hellie Wainrite (a famous actress). Mildred has not paid the full amount and
taken the products and sold it to Noor. Our primary issue is to determine with whom the contract was
formed, who has the title to the products and whether any contract formed will be held void due to
mistake. We note that mistake renders a contract void from the outset However, we first need to
determine if the mistake is unilateral or bilateral.
In our case keeping in mind the first transaction Julie is clearly thinking she is contracting with Hellie but
in fact it is Mildred i.e. one party is mistaken and suvh mistake is unilateral and is related to mistake of
identity if person
Since there is an identity mistake, to determine with whom the contract is formed i.e. Mildred or Hellie,
the courts have developed two separate concepts. If the contract with the fraudster is made through non-
physical means then the "inter absentis" law applies and the contract is made with the existing person
under whose alias the fraudster is operating and the existing person gets the title whereas the fraud only
gets the goods. Such contract becomes void due to mistake and the title reverts back to the original party
who keeps the products (Shogun Finance v. Hudson) (Cundy v. Lindslay). However, if the contract is
made face to face with the fraudster, the "Inter Presentis" law applies and the contract is not formed with
the existing person but rather with the fraud who gets the title and transfers it to the third party who will
keep the products (Philip v. Brooks) (Lewis v. Avery). In our case, although the initial conversation
between Julie and Mildred occurred on call, the contract was formed face to face when Mildred visited
her shop. According to Inter Presentis the contract will be formed with Mildred who will get the title and
this contract will not be held void and the title can pass on to Noor who will keep the products
However, we see that the original contract between Julie and Mildred has another operative mistake since
both parties think it is a female beauty kit but actually it’s a male beauty kit. Clearly, there is a bilateral
common law mistake regarding quality of subject matter. The law in this regard is extremely narrow, the
courts will only hold a contract void for quality if the quality is so different that the basic purpose of the
contract cannot be achieved (Bell v. Lever Bros) (Japanese Associated Bank case) (Great Peace Shipping)
(Leaf v. International Galleries). In our case, the basic purpose of a female beauty kit can not be achieved
by a male beauty kit. Hence, the contract will be held void for quality mistake, the title therefore will
revert back to Julie and would not be passed by Mildred to Noor. Hence, Therefore, Julie will get to keep
the products.