'The mere fact that one of the parties to a contract acted under a mistake does not, as a general rule, affect the validity of the contract.'
Discuss the circumstances, when a mistake by one of the parties will affect the validity of the contract.
(20 marks, 2013 Q8)
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References can be made to:
Wikipedia on Mistake (Contract Law) here.
By law teacher.net as Mistake Law here.
By lawresources.co.UK as Mistake here.
Section 22 of Contracts Act, 1950 - Effect of mistake as to law.
A contract is not voidable because it was caused by a mistake as to any law in Malaysia; but a mistake as to a law not in force in Malaysia has the same effect as a mistake in fact.
A and B make a contract grounded on the erroneous belief that a particular debt is barred by limitation: the contract is not voidable.
Section 23 of Contracts Act, 1950 - Contract caused by mistake of one party as to matter of fact.
A contract is not voidable merely because it was caused by one of the parties to it being under a mistake as to a matter of fact.
By Common Law
Mistake by one of the parties in a contract is called 'Unilateral Mistake'. Amongst, there are two categories within unilateral mistakes:
- mistakes relating to the terms of the contract; and
- mistakes as to identity.
Mistake as to the terms of the contract
Hartog v Colin & Shields  3 All ER 566 Case summary
Smith v Hughes (1871) LR 6 Case summary
Where one party is mistaken as to the nature of the contract and the other party is aware of the mistake, or the circumstances are such that he may be taken to be aware of it, the contract is void - see Hartog v Colin & Shields (1939).
Hartog v Colin & Shields  3 All ER 566
The defendants mistakenly offered a large quantity of hare skins at a certain price per pound whereas they meant to offer them at that price per piece. This meant that the price was roughly one third of what it should have been. The claimant accepted the offer.
The court held that the contract was void for mistake. Hare skins were generally sold per piece and given the price the claimant must have realized the mistake. For the mistake to be operative, the mistake by one party must be as to the terms of the contract itself.
[For example, Tenant agreed to rent the shop with rental of RM3,000. However, the Landlord is of the assumption that the Tenant is renting the only the first floor although the contract agreement was wrongly written as for the whole shop. The Tenant however, knew that he only rent for the upper floor, and not the ground floor, but insisted to use the ground floor as contract agreement stated so. The Landlord disagreed. Tenant asked to claim for compensation due to void of contract.
The mistake was in the terms of the contract, and generally the rental for the whole shop cannot be so low as RM3,000. Thus, mistake of this type would render the contract void. However, as the contract is void in the first place due to mistake as to term of contract, there is no compensation.]
A mere error of judgement as to the quality of the subject matter will not suffice to render the contract void for unilateral mistake.
Smith v Hughes (1871):
The claimant had purchased a quantity of what he thought was old oats having been shown a sample. In fact the oats were new oats. The claimant wanted the oats for horse feed and new oats were of no use to him. The seller was aware of the mistake of the claimant but said nothing. The claimant brought an action against the seller based on mistake and misrepresentation.
Held: both actions failed. The action based on misrepresentation failed as you cannot have silence as a misrepresentation. The defendant had not mislead the claimant to believe they were old oats. The action based on mistake failed as the mistake was not as to the fundamental terms of the contract but only a mistake as to quality.
Mistake as to Identity
Mistakes as to identity are generally induced by fraud in that one of the parties is claiming to be someone who they are not. This is like the buyer is not exactly the correct buyer. For example, Ali sold the house to Abu, who was not actually Abu. Abu did not come, it was his older brother Abang.
Inter absentes (at a distance): Ali never saw Abu, and thought that it was Abang the correct buyer.
Where the parties are not physically present when the contract is made, eg where the contract is made through dealings through the post, telephone or over the internet, the courts will only make a finding of mistake if the claimant can demonstrate an identifiable person or business with whom they intended to deal with. A mistake as to their attributes will not suffice:
Cundy v Lindsey (1878) 3 App Cas 459
A rogue, Blenkarn, hired a room at 37 Wood street, Cheapside. This was in the same street that a highly reputable firm called Blenkiron & Son traded.
If the contract was void, title in the goods would not pass to the rogue so he would have no title to pass onto the defendants. Ownership of the goods would remain with the claimant.
Held: The contract was void for unilateral mistake as the claimant was able to demonstrate an identifiable existing business with whom they intended to contract with.
Inter praesentes (Ali thought Abu is Abang, as they quite look a like)
Where the parties contract in a face to face transaction the law raises a presumption that the parties intend to deal with the person in front of them:
Phillips v Brooks  2 KB 243 Case summary
A rogue purchased some items from the claimant's jewellers shop claiming to be Sir George Bullogh. He paid by cheque and persuaded the jewellers to allow him to take a ring immediately as he claimed it was his wive's birthday the following day. He gave the address of Sir George Bullogh and the jewellers checked the name matched the address in a directory. The rogue then pawned the ring at the defendant pawn brokers in the name of Mr. Firth and received £350. He then disappeared without a trace. The claimant brought an action based on unilateral mistake as to identity.
Held: The contract was not void for mistake. Where the parties transact face to face the law presumes they intend to deal with the person in front of them not the person they claim to be. The jewellers were unable to demonstrate that they would only have sold the ring to Sir George Bullogh.
[Ali sold the house to Abu, thinking that he is Abang. Later on, Ali regretted as he wanted to sell to Abang at a higher price. He argued that the mistake renders the contract void.
Ali sold the house to Abu having negotiated face to face (inter praesentes) present together. Hence, the law cannot accept the argument that Ali could have not recognized Abu as the correct buyer. Event if it was dark and dim, Ali would have to make judgment according to his willingness to come to a contract. Ali being a willing seller, could have sold to another person in place of Abu without Abang in consideration. Therefore, this is mistake of identity (of the person) and not the form (quality or form of the goods), and cannot be accepted as to void the contract.]
Mistake, e-Lawresources, available at