Sec.

2(g) & 24
- all agreements which
are not enforceable by
law, whether due to
unlawful consideration
or other grounds & is
treated as not having
any legal effect
Sec. 21 (contract is
void) / 22 & 23 (not
being voidable, contract
will be valid & binding)
- incorrect
understanding by one /
more parties to a
contract & hence can be
used as grounds to
invalidate a contract

- when both parties

makes the same mistake
about some underlying &
fundamental facts (ex:
existence of subject
matter)

- cargo of corn was

shipped by plaintiff at
Salonica for delivery to
London
- however, it was
subsequently sold on
their behalf, by
defendant to 3rd party
(del credere)
- this is bcs, the corn
has bcm so heated that
[Couturier v Hastie] it fermented during the
voyage, & bringing it to
England bcm impossible
- court held that the
contract for the sale of
the cargo of corn
entered by defendant
was VOID, on the basis
of common mistake
(buyer was not liable for
the price, as there was
nothing to be sold under
the contract)
- plaintiff was employed
by defendant to be as a
director of the company
- after 3 years,
1. COMMON MISTAKE defendant terminated
plaintiff's services & paid
him certain amount of
money as compensation
- however, defendant
later found out that
plaintiff has breached
his responsibilities as
the director of the
company, by doing
certain wrongful acts,
which would entitle the
company to dismiss him
[Bell v Lever Bros Ltd] without any payment at
all
- hence, defendant
claimed for the return of
money on the ground
that it was paid by
mistake
- court held that the
compensation
agreement was binding,
as the mistake regarding
legal relations btwn
plaintiff and defendant
did not involve actual
subject-matter of
contract, but merely
related to quality of its
subject-matter
- contract is void ab
Effect of Common initio in the case where
Mistake: the subject matter is
non-existence

- when both parties are

under a mistake,
misunderstand each
other & at cross
purposes (no genuine
agreement as the offer &
acceptance do not
correspond)

- plaintiff sold cotton to

defendant
- the agreement
provided that the cotton
was to arrive from
Bombay to England
- however, there were
two ships regularly
sailing from Bombay to
England; one leaving in
Oct, another one leaving
in Dec
- plaintiff shipped the
2. MUTUAL MISTAKE
cotton on the Dec's
[Raffles v Wichelhaus] ship, but defendant
refused to accept it as
he thought the shipment
would be shipped on the
VOID CONTRACT Oct's ship
- plaintiff sued
LAW436 - Free Consent defendant
- court held that there
1. Mistake was NO binding
contract, as both parties
meant diff. ships & there
was a mistake by both
3 Types of Mistake parties (buyer was
under Common Law entitled to not accept
the Dec's cargo)
- for mutual mistake to
be operative, the
Effect of Mutual Mistake:
mistake must have been
a fundamental nature

- when only ONE party

makes a fundamental
mistake, to the
knowledge of the other

- respondent gave
appellant an option to
purchase a land (10
acres), for $15,000
- however, respondent
declined to perform as
she was under the
mistaken belief that the
agreements provided for
$15,000 AN acre, which
makes the total price to
be $150,000
[Taylor v Johnson] - the appellant not only
knew that the
respondent was
labouring under a
serious mistake as to the
price, but took
deliberate steps to make
sure that her mistake
was not discovered
- court held that the
contract was NOT void,
but would be set aside
on equitable principles

Effect of Unilateral
- contract NOT void
Mistake:

- when one party is

fraudulent & parades as
somebody else, to
deceive the other party
& the other party is
unaware of it

i. That his intention was

to deal with someone
other than the person
with whom he
transacted.
ii. That the other party
In order for the innocent knew of this intention.
party to claim operative
mistake, he must prove: iii. That he had taken
reasonable steps to
verify the identity.
3. UNILATERAL
MISTAKE iv. That the identity of
the other party was
important to him in the
transaction.
- a rogue named
Blenkarn offered to buy
goods from Lindsay &
Co by pretending to be
'Blenkiron & Co' (a
reputable business on
the same street as
rogue)
- Blenkarn signed the
letter in a way that it
could be read as
Mistake as to Identity: 'Blenkiron'
- Lindsay dispatched the
goods & the rogue sold
them to Cundy who took
the goods on good faith
- when Blenkarn failed
[Cundy v Lindsay]
to pay, Lindsay sued
Cundy in conversion of
goods
- court held that the
contract is void &
Lindsay could recover
the goods, since the
mistake about the
identity of the rogue
voided the contract from
the start (Lindsay meant
to deal only with
Blenkiron & Co, hence
there was no contract
btwn them) (title did not
pass to the rogue, and
therefore could not be
passed to Cundy)
- when courts have held
that there was a valid
contract, the contract
was VOIDABLE for fraud
Effect of Mistake in & misrepresentation
Identity: - but courts should also
consider the 'ad idem'
factor, which may result
in the contract
becoming VOID