3.

Absence of Consensus: Mistake

This section deals with mistakes that are material and therefore vitiate consensus between the
parties.

3.2 Classifications of mistake

3.2.1 Common, mutual and unilateral mistake

The following table, I think, commendably describes the differences between these three types of
mistake, which was imported into South African law from English law

Common Mistake  A and B make the same mistake

 There is consensus
 It is based on a common, false
assumption

Mutual Mistake  A and B are at cross purposes.

 Each is mistaken about the other’s
intention
 There is dissensus

Unilateral mistake  A is mistaken about B’s intention

 B knows of A’s mistake but remains
silent.
 There is dissensus.

The distinction between unilateral and mutual mistake is of little practical significance and they are
both usually called unilateral mistakes.

Relevant and irrelevant mistake

It is sometimes said that a mistake does not vitiate consensus if it does not affect the party’s
decision to enter into a contract. This occurred in Khan v Naidoo, where a woman signed a surety
contract thinking it was a transfer of property. The court held that Khan would have signed the
contract even if she had known the true nature thereof and that the mistake did therefore not
vitiate consensus.

This is confusing, though. The textbook recommends that we should ignore this distinction and I
wholeheartedly agree.

Material and non-material mistake

A mistake is material if it vitiates actual consent between the parties. A mistake is immaterial if it
does not. If a mistake is material, the contract is void for mistake unless reasonable reliance is
present. If a mistake is non-material, then it may be voidable according to the principles in the next
chapter.

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A mistake is material, therefore, if one or more of the elements of consensus are not present:

1. Serious intention to contract. This will not be present if:

a. The agreement is in jest.
b. The agreement is a social agreement.
c. The parties just don’t have the animus contrahendi.1
2. Agreement as to the material aspects of the contract.2 This will only be present if both of
the following are present:
a. They are in agreement as to the persons between whom the obligations are to be
rendered. This will not be the case if:
i. An offer is intended for A but it is accepted by B.3
ii. An offer is intended for A but it is accepted by A and B.4
b. They are in agreement as to the content of the obligations that are to be created.
This will not be the case if:
i. They do not agree on the subject matter of the contract, for example, A
believes he is purchasing house A when he is actually purchasing house B.5
ii. Where the contracting party does not understand a provision of a contract
he is signing.6
iii. Any mistake allowing a party to unilaterally vary aspects of performance7 or
to release itself from liability.8
3. Each party must be aware of the other’s animus de contrahendo.9

A non-material mistake usually relates to a party’s motive for entering into the contract, rather than
a mistake about the contents of the contract itself. For example, in Diedericks v Minister of Lands,
the Minister purchased land from Diedericks unaware of a power to repossess Diedericks’ land at a
much cheaper rate. The court held that the mistake related to the Minister’s motive and that
consensus still existed.

In Van Reunen Steel, a company was owned by three shareholders (A, B and C). A was the majority
shareholder. The company was struggling financially. A dies and an executor (Smith) winds up his
estate. C wanted A’s shares to be used to try to save the company. C goes to van Reunen and tells
him the company is a viable investment. Van Reunen, an accountant does a due diligence test and
buys the company. Company turns out not to be viable. Van Reunen then argues that the contract
is void for mistake. He first argues common mistake, but the court holds that Smith knew the

1
Mondorp Eiendomsagentskap v Kemp en De Beer.
2
This sounds pretty circular to me.
3
Potato Board.
4
Bird v Sumerville.
5
Allen v Sixteen Stirling Investments.
6
See Brink and Compusource.
7
Spindrifter.
8
Compusource. This is the source the textbook gives for this. I don’t think this was really the basis of the
judgment. The reason the judge gave for saying the mistake was material was not so much because
Compusource was mistaken about a clause that exempted Constantia from liability, but more because the
clause was unexpected.
9
See Bloom v American Swiss.

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company wasn’t viable. He second argues that it is a material mistake. The court disagrees, holding
it is a mistake in motive.

In Orban v Steel, Orban wanted to buy a property for his daughters to build and run a kindergarten.
The building society points out a property, but represents that it is bigger than it actually is. Its
actual size makes it unsuitable for a Kindergarten. Court holds that this is an error in motive and is
not material, as he wanted the land for his kindergarten. Hutch reckons this was badly decided

Traditional classifications of mistake

The traditional classifications below are not an entirely different set of categories; they are just a
way of stating the above principles with reference to prominent instances:

1. Error in corpora:
a. A mistake as to an object of performance.
b. It is material.
c. I want to buy house A, but the contract actually stipulates house B.10
2. Error in negotio:
a. A mistake as to the nature of the contract itself.
b. It is material.
c. I sign a contract of surety but, as I am illiterate, I think it is a contract for the transfer
of property.11
3. Error in persona
a. A mistake regarding the identity of the other party to the contract.
b. Some decisions have said that it is only material if the identity of the party is of vital
importance to the mistaken party.12 The textbook advises that we always treat
errors in persona as material.
c. I sell my house to A, thinking I am selling to A and B. If this is of vital importance to
me, the mistake is material.13
4. Error in substantia:
a. A mistake regarding an attribute or characteristic of the object of performance.
b. It is not material.
c. I buy a farm, thinking the borders are slightly different to what they actually are, and
thinking the land contains more forest than it actually does.14

The traditional categories are not exhaustive and the textbook recommends that the question is
really whether a particular mistake relates to the content of an obligation, or merely the motive for
actually entering into the contract.

10
Maresky v Morkel.
11
Khan v Naidoo.
12
Venter v Credit Guarantee Insurance Corporation of Africa
13
Kok v Osborne.
14
Trollip v Jordaan.

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 Mistakes of law and mistakes of fact
There is some confusion in South African law about this issue:

1. In Kimberley Share Exchange Co v Hampson15 the court held that a mistake of law does not
vitiate consensus.
2. In Van Aartsen v Van Aartsen, it was held that a mistake of law that relates to motive does
not vitiate consensus.
3. The textbook argues that the mistake of law/fact dichotomy is only incidental to the main
enquiry of whether or not the mistake affected consensus and therefore whether it is
material.

3.3 The South African approach to material mistake in the law of contract
As we all know, the will theory is the basis of our law of contract and that it is corrected by the
reliance theory. The reliance theory is applied in one of two ways: directly through the subjective
approach (quasi-mutual assent/estoppel) or indirectly through the objective approach (iustus error).

To summarise briefly the South African approach to mistake (broadly speaking) is as follows: First
ask, is the mistake material (in other words, is there consensus)?

1. If no, then consensus exists. Then ask, is there misrepresentation inducing a non-material
mistake?
a. If yes, apply the remedies for misrepresentation.
b. If no, a valid contract exists.
2. If yes, consensus does not exist. Then ask, is there reasonable reliance (in the form of iustus
error or quasi-mutual assent)?
a. If yes, then a valid contract exists.
b. If no, then no valid contract exists.

Quasi-mutual assent (reliance theory)

Reliance theory comes from the English judgment of Smith v Hughes, where Blackburn J said that if
there is no subjective consensus, there is no contract, unless the one party so conducts himself that
the other party reasonably believes there to be consensus. The basis of reliance theory is disputed,
however:

Estoppel
Some say that its basis lies in the English principle of estoppel. This theory stipulates that if one
party (the estoppel raiser) reasonably relies on a misrepresentation made by the other party (the
estoppel denier) to the former’s detreiment, then the misrepresented facts are upheld as if they are
correct. Estoppel will not be upheld if it is contrary to public policy.

15
1882.

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In Van Ryn Wine & Spirit Co v Chandos Bar16 it was held that estoppel could succeed as a fictitious
means to uphold a contract that otherwise lacked consensus.

Estoppel has some shortcomings, however:

1. It is difficult for the estoppel raiser to prove estoppel, as he must prove prejudice and
possibly fault.
2. It only gives rise to a “fictitious contract”, which means that rights cannot be ceded

Quasi-mutual assent
The balance of authority says that Smith v Hughes actually deals with the doctrine of quasi-mutual
assent. According to this doctrine, if the contract assertor reasonably relies on the appearance of
consensus induced by the contract denier then an actionable contract exists.

In instances of material mistake vitiating consensus, the doctrine of quasi-mutual assent stipulates
that a contract will exist when:17

1. The contract denier misrepresented his intention and;

2. The contract assertor did not realise there was a misrepresentation and;
3. A reasonable person in the position of the assertor would not have realised a
misrepresentation had occurred.

If the last two elements are present, it can be said that the assertor reasonably relied on the
appearance of a contract and that a contract therefore existed.

Some examples of cases where quasi-mutual assent was successfully relied on:

1. This approach first entered into South African law in Pieters & Co v Salomon, where the
plaintiff offered to pay a debt of a third party to the defendant. The defendant accidentally
accepted an amount that was lower than the debt. The judge held that, because the
plaintiff reasonably relied on the defendant’s appearance of consensus, a contract existed.
2. In Hodgeson v SA Railways, Hodgeson offered to sell a lorry to SA Railways for £500. SA
Railways expressed an acceptance of this offer. Later, it said that it had actually only
intended to pay £300 for it. The court upheld the contract based on Hodgeson’s reasonable
reliance.
3. In Ridon v Van der Spuy and Partners the defendants (a firm of attorneys) accidentally told
Ridon that its client had offered to pay Ridon R358 000 for his farm. The client actually
wanted to pay less than R385 000. The court held that there was dissensus, that Ridon had
genuinely thought the client had offered to pay R385 000 and that a reasonable person
would have thought the same. The contract was therefore upheld.

Some examples where quasi-mutual assent was not successfully invoked:

16
1928 TPD
17
As formulated in Sonap Petroleum v Pappadogianis

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 1. In Sonap, the contract assertor (Pappadogianis) realised that the contract denier (Sonap
Petroleum) had accidentally written down the wrong lease period, contrary to earlier
representations. Pappadogianis therefore realised that there was a misrepresentation and a
contract did not exist.
2. In Compusource, a reasonable person in the position of the assertor (Constantia Insurance)
should have realised that Compusource (the denier) had not intended to consent to an
exemption clause. A reasonable person in the position of Constantia should therefore have
realised that a mistake had occurred and the contract was therefore not upheld.
3. In Steyn v LSA Motors18 a reasonable person in the position of Steyn would have realised
that the prize was only being offered to professional golfers and the contract was therefore
not upheld.

The onus is on the contract assertor to prove that a contract exists on the basis of quasi-mutual
assent. If a document has been signed, the doctrine of caveat subscriptor creates a presumption
that a contract exists on the basis of quasi-mutual assent. Either way, if the contract assertor
discharges his onus, then the onus is placed on the denier to prove that the elements of quasi-
mutual assent are not present.

Some issues are not clear in the doctrine of quasi-mutual assent:

1. It is not clear whether fault is required for a successful invocation of quasi-mutual assent. All
indications are that it is not.19
2. A similar situation exists with regard to prejudice.20
3. The general approach, according to the textbook, is that fault and prejudice are not essential
elements of reasonable reliance but simply part of the entire enquiry.

The objective approach qualified by the doctrine of justus error

The justus error approach is based on the declaration theory. The case for declaration theory in
South African law is based on two legs:

1. Wessel JA strongly seeming to advocate it in SA Railways v National Bank of South Africa.

2. Cases relying on the iustus error doctrine, such as the Potato Board case.

The iustus error doctrine is a corrective measure in cases of dissensus. It provides that a party will
not be bound to an agreement if that party apparently gave his consent and that his mistake is
material and excusable.21 The iustus error doctrine comes from the following two famous cases:
George v Fairmead (separate summary attached) and National and Overseas Distributors v Potato
Board. In the Potato Board case, National Distributors submitted a tender to build a shed to the
Potato Board. The Potato Board mistakenly sent an acceptance letter to National Distributors,
intending to send it to someone else. Here, the court held that because National Distributors had

18
See Section 1 for a summary of the facts of this case.
19
Hartley v Pyramid Freight.
20
Mondorpv Kemp and de Beer.
21
The textbook says reasonable, but the tutor recommends that we use the word excusable, which I agree
with.

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made no misrepresentation and that there was no indication that his offer was being accepted by
mistake, the court held that the contract should be enforced.

Whether or not a mistake is material has already been dealt with. A mistake will usually be
excusable if one or more of the following elements are present:

1. The contract assertor knew the denier was mistaken.

a. This was the case in Sonap Petroleum (even though the court there did not apply the
iustus error doctrine).
b. In Hartog v Colin & Shields (an English case), Shields offered to sell Hartog 30 000
skins at prices per pound when they intended the prices to be per skin. The court
struck down the contract, holding that Hartog knew about the price mistake and
that Shields’ error was therefore excusable.
2. The contract assertor should have realised that the denier was mistaken.
a. In Horty Investments v Interior Acoustics, Interior Acoustics signs a contract of lease
with Horty Investments. The contract contains a non-escalation clause and
mistakenly says that the lease is for 12 years (it was meant to be for 2 years). The
court held that the non-escalation clause was inconstant with the inordinately long
lease and as such Interior Acoustics should have realised that Horty was mistaken.
The court therefore held that Horty’s mistake was excusable.
b. In Prins v Absa, Prins signed a document under the impression that he was signing a
suretyship that was limited to R10 000, when it was actually an unlimited suretyship.
The court held that, based on Prins’ correspondence with Absa, Absa should have
known that Prins was mistaken when he signed the document. The court therefore
held that Prins’ error was excusable.
3. The contract assertor induced the denier’s mistake, either by:
a. Positive misrepresentation or;
i. In Allen v Sixteen Stirling Investments, SSI caused Allen to be mistaken about
the property that he was buying by pointing out a different property to the
one that appeared on the deed of transfer.
b. Misrepresentation by silence. This occurs when the contract assertor had a duty to
inform the denier about something in the contract. Courts have considered the
following criteria in determining whether there exists a duty to speak:
i. Whether something was said before the conclusion of the contract that
would make the provision in question unexpected.22
ii. Whether the provision in question is usually a part of the kind of agreement
that was entered into.23
iii. The knowledge and training of the person who signed the agreement.24
iv. Knowledge that something about a certain clause is very important to the
denier.25

22
Du Toit v Atkinson Motors
23
Brink v Humphries.
24
Brink v Humphries.

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 Application of misrepresentation by silence
Du Toit v Atkinson Motors: When, prior to the conclusion of the contract, the contract assertor
creates an impression that directly conflicts with a provision in the contract, then the assertor has a
duty to inform the denier about this discrepancy. In Du Toit v Atksinson Motors, the court held that
an advertisement claiming that a car was a 1979 model created a duty on Atkinson to inform Du Toit
that the contract he was signing was for the purchase of a 1976 model and that it contained a non-
misrepresentation clause.

Spindrifter v Lester Donovan: Lester Donavan was a person who went around to small businesses to
sell spaces in trade fairs. Donavan went up to Spindifter and tried to sell the idea to him. From the
context it was clear that the date was very important to Spindrifter. Spindrifter, under pressure,
signed a contract for a stall. Later, Donavan moves the date of the exhibition, a power granted to
him by the contract. Spindrifter said he didn’t know about the date-changing clause and tried to get
out of the contract. The AD held that the fact that it was clear that Spindrifter cared about the date
of the fair created a duty on Donavan to inform Spindrifter about the date-changing clause.

Kempson Hire: TWM hires vehicles from Kempston hire on contracts of lease. In one instance
Snyman, a clerk for TWM, signs a document for a bakkie. A clause in the document made the clerk
stand surety for the bakkie. TWM goes into liquidation and Kempston Hire, realising that TWM
won’t pay their debts, sues Snyman on the basis of the contract. The AD held that, because a surety
clause was unexpected in this kind of document, Kempston had a duty to tell Snyman about it.

Keens Group v Lotter: Keens Group is a wholesale supplier of electrical equipment. Collins is a small-
scale electrical outfitter. Collins applies for a credit facility with Keens. Keens sends over a contract
for credit. This contract contains a pretty standard clause making the directors stand surety for this
contract. Lotter, a director, signs the document. The court held that Keens should have drawn
Lotter’s attention to the clause.

Academic commentators argue that Lotter, as a director who was not under pressure signing a
document that often contains a surety clause, should have known about the clause and there was
therefore no duty to speak.

The role of fault

The role of fault in the iustus error doctrine is uncertain:

1. A finding of fault on the part of the denier will weigh against a finding of excusability on his
part.26
2. However, several cases have found that even though the denier was negligent in not reading
the document his error could be excusable.27
3. Fault on the part of the contract assertor in the form of wrongful representation will
probably weigh in favour of a finding of excusability on the part of the denier.

25
Spindrifter v Lester Donavan.
26
Diedericks v Minister of Lands.
27
Du Toit v Atkinson, Spindrifter, Brink v Humphries.

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 Reconciling the quasi-mutual assent and iustus error
Sonap v Pappadogianis reconciled the quasi-mutual assent and iustus error doctrines by holding that
the iustus error doctrine was just an indirect application of reliance theory, whereas quasi-mutual
assent was a direct application thereof. This essentially means that if a mistake is excusable then
reasonable reliance will not be present and vice versa. Sonap applied the quasi-mutual assent
doctrine.

It is also important to note that Sonap said that estoppel confused the enquiry into mistake, that
fault was unnecessary for the application of quasi-mutual assent and that no mention was made of
prejudice.

Check the table in the textbook for a clear exposition of how QMA is the converse of iustus error.

3.4 Common mistake

A common mistake is when both parties knows and accepts the intention of the other party but are
mistaken as to some underlying, fundamental fact. A fact is fundamental in circumstances where, if
both parties were aware of the true nature of the fact, they would not have entered into the
contract. A common mistake renders a contract void. 28

The most accepted explanation as to why a common mistake renders a contract void is that the
fundamental fact is held to be an implicit guarantee in the contract that is material.

An example of a common mistake is Dickinson Motors v Oberholzer. Here, Oberholzer paid money
over to Dickinson motors in order to retain ownership car A. Both parties, however, thought that it
was car B. The court held that the contract was void.

3.5 Rectification of contract documents

A party may apply to a court for rectification of a written contract when it fails to reflect the parties’
initial common intention accurately. Ordinarily, parties engage in rectification themselves, but a
court order becomes necessary when one party wishes the enforce the contract as written.

Rectification has been allowed in the following specific circumstances:

1. When the contract does not comply with the true intentions of the parties.
2. When the disparity is caused by the fraud of one of the parties.29
3. This is not doctrinally pure, but to prevent unintended, harsh consequences from emerging
from the way the contract was recorded.
a. In Milner Street Properties v Eckstein Properties, the court permitted rectification of
a contract that reflected the parties’ common intention in order for the transaction
contained in the contract to qualify for a VAT zero-rating.

28
Dickinson Motors v Oberholzer.
29
Benjamin v Gurewitz. Jews.

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 b. In Mouton v Hanekom, the court allowed rectification even though both parties had
intentionally decided not to reduce some of their agreement to writing.

Courts will not allow rectification where writing is required for the very validity of the contract, such
as for the transfer of ownership of land as required by the Alienation of Land Act.

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