This is also known as identical mistake, shared mistake or mistake nullifying consent. In this situation, both parties make the same mistake. A shared mistake will only render a contract void if the mistake relates to one of three subjects, which the courts consider fundamental to the contract: the existence of the subject matter, its ownership and, in limited cases, its quality.
Mistake as to the existence of the subject matter
This kind of mistakes will usually concern goods to be sold and other types of subject matter. It is not always the case that non-existence of the subject matter will render a contract void, and there are several cases which make this area of the law difficult and rather unclear. In the case of Couturier v Hastie (1856) and McRae v Commonwealth Disposals Commission (1951), the courts were of the opinion that the transaction of the parties concerned a specific cargo, believed to exist, and this had been the basis of the decision of the parties. Hence the position that the cargo later did not after the contract was concluded could not mean that the contract was void.
In the case of Associated Japanese Bank v Credit du Nord (1988), the following guidelines were put in place to establish when a mistake as to subject matter will render a contract void.
- The mistake must be substantially shared by both parties and it must render the subject matter essentially and radically different from the subject matter which the parties believed to exist.
The court pointed out that the rules on mistake as to subject matter were designed to deal with the impact of exceptional circumstances, rather as the doctrine of frustration does, the implication being that they are not to be used as an excuse to get out of undesirable or inconvenient obligations.
Mistake as to title
Very rarely, a situation will arise in which one party agrees to transfer property to the other, but unknown to the both of them, the later already owns that property. In such a case, the contract will be void for mistake. This was the situation in the case of Cooper v Phibbs (1867).
Mistake as to quality
This particular aspect of mistake is quite complex to ascertain as it will be based on the intention of the parties, the basis of their decision vis a vis the quality at the time of the transaction or the nature of business they engaged in.
In some cases, mistakes as to the quality of the subject matter will not affect the validity of the contract. This may be so even where the quality of the goods are a major factor in the decision to buy. This was the case in Harrison & Jones v Bunten & Lancaster (1953).
In the case of Nicholson & Venn v Smith-Marriot (1947), the court gave two position as follows;
- If the subject matter was the strength on which a party intended to buy and sell a good, then a mistake on the quality will be fundamental to vitiate the contract, but
- If the intention of the party was just to buy and sell the particular goods, the mistake on the quality will not be fundamental enough to vitiate the contract.
Common mistake in equity
The main contribution made by equity to the rules on common mistake concerns mistakes as to quality of the subject matter. Where such a mistake is not sufficiently fundamental to render a contract void at common law, it may still make the contract voidable in equity, though the courts may impose terms in order to make the decision fair. This was the position in the case of Solle v Butcher (1950).