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MGSC30H3 Lecture Notes - Non Est Factum, Rescission, Punitive Damages

Management (MGS)
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Chapter 11
Mistake: a state of affairs in which a party (or both parties) has formed a mistaken opinion as to the identity or
existence of the subject matter, or of some other important term
o If consideration is clearly out of line and the mistake is obvious, the courts may not allow the other party to
“snap up” the bargain
o When mistake is due to the party’s’ own negligence, the contract may be binding
Mistake of Law
Mistake could take the form of a mistake of law
Recovery was only possible if the statute provided for recovery of the money paid, or there was some other conditions
related to the mistake that permitted the court to direct the repayment of the money
Mistake of Fact
Mistake of Fact: mistake as to the existence of the subject matter of a contract or the identity of a party
Contract is void due to a mistake as to the existence of the subject matter
If the identity of the party is not an essential element of the agreement, then the agreement may be enforceable.
If one party to the contract does not wish to be bound in an agreement with a particular contracting party, and is misled
into believing that they are contracting with someone else, the contract may be voidable when the true facts are
Non Est Factum
Mistake may occur when one party may be mistaken as to the true nature of a written contract
o Person signing the document must have been led to believe that the document was completely difference that
what it actually is
To avoid liability a person must be in a position to establish that the document was completely different in nature from
the document described
Non est factum: a defence that may allow illiterate or infirm persons to avoid liability on a written agreement if they can
establish that they were not aware of the true nature of the document, and were not careless in its execution
o Cannot use this defense if they were careless in signing the document
o The document must be completely different in the nature for this defence to work, not just differing to some
Unilateral and Mutual Mistake
Unilateral Mistake: A mistake by one party to the agreement
Mutual Mistake: A mistake where both parties have made mistaken assumptions as to the subject matter of the
Contracts unenforceable when a party makes or accepts an offer that they know the other party thinks to be materially
different from what they accept
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