ACCT 202 Lecture Notes - Lecture 3: Rebuttable Presumption, Uberrima Fides, Equitable Remedy
29 May 2018
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Chapter 11: Failure to Create an Enforceable Contract (pg194-208; PDF 227-241)
Offer and acceptance, capacity, consideration, legality of object, and an intention to create a legal
relationship all must be present, together with the requirements of form and writing, under
certain circumstances. But even when these elements are present, the parties may not have an
agreement that both may enforce until they also show that they both meant precisely the same
thing in their agreement
There are essentially four situations of this general nature that could arise and render the
agreement unenforceable.
1. Mistake: A state of affairs in which a party (or both parties) has formed an erroneous opinion as
to the identity or existence of the subject matter, or of some other important term. It narrowly
refers to a situation where the parties have entered into an agreement in such a way that the
contract does not express their true intentions, this may occur when the parties have formed an
untrue impression concerning an essential element, or when they have failed to reach a true
meeting of the minds.
• If the consideration is clearly out of line and the mistake is obvious, the courts may not allow
the other party to sap up the argai ut if istake due to parties own negligence the
contract may still be binding.
Mistake of Law
As a consequence, recovery was only possible if the statute provided for recovery of the money
paid, or there were some other conditions applied, and subject to available defences and
equitable considerations,. Where an otherwise constitutional or intra vires statute or regulation is
applied in error to a person to whom in its true construction it does not apply, the Supreme Court
of Canada decided that money paid under a mistake of law should not be distinguished from
mistake of fact. In essence, the difference should be abolished
Mistake of fact: Mistake as to the existence of the subject matter of a contract or the identity of a
party. If the parties are mistaken as to the existence of the subject matter of the contract, then
the contract will be void. Under the Common Law, the courts would not require the purchaser to
accept something different from what she had contracted to buy OR when there is a mistake as
to the identity of one of the contracting parties. if the identity of the person in question is an
essential element of the contract.
If the identity of the party is not an essential element of the agreement, then the agreement may
be enforceable ut if soeoe does’t at to joi a otrat ith a speifi perso ad they are
misled into a contract them thinking it was someone else the contract may be voidable when this
is discovered if identity is an important element in the contract.
Non est factum mistake:The important distinction here is that the circumstances surrounding the
signing of the written document must be such that the person signing the document was led to
believe that the document was of a completely different nature from what it actually was in the
ase that if they ke hat the agreeet ters ere they ould’t hae siged it To aoid
liability, a person must be in a position to establish that the document was completely different in
nature from the document described, and that due to some infirmity or circumstances he or she
was obliged to rely entirely on another person to explain the contents and prove that that it was
not possible to obtain an independent opinion or assistance before signing the document and
they ere’t siply arless
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. But it’s liited this defee to a ery arro group of
contracting parties.
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Must prove they were obliged to sign, that it appeared as if it were something other than what it
was, that they were not carless and the infirmity that made a personal examination and
understanding of the document impossible
If, however, the document is not of a different nature, but, rather, the same type of document as
described, differing only in degree, then a defence of non-est factum would be unsuccessful.
There are, however, persons who, as a result of advanced years, some infirmity, or simply a lack
of knowledge, are unable to read the written agreement. It is this group that the courts are
prepared to assist if, through their reliance on another, they have been misled. If the opportunity
for idepedet adie is aailale, ad did’t take it the ourts ill proaly treat their atios
as areless ad they o’t e ale to aoid the otrat
Forms of mistake
Unilateral mistake: A mistake by one party to the agreement. Usually one of the parties is
mistaken as to some element of the contract, and the other is aware of the mistake usually due
to misrepin in which they may allow it to exist or actively encourages the false assumption the
courts tend to treat contracts as being unenforceable when a party makes or accepts an offer
that he or she knows the other party thinks or understands to be materially different from what
he or she makes or accepts. For example, when a seller, offering to sell a particular product to a
buyer, knows that the buyer believes the offered product is something different from what it is.
The court may permit the buyer to rescind the agreement
Mutual mistake: A mistake where both parties have made mistaken assumptions as to the subject
matter of the agreement. It encompasses common forms of mistake, such as mistake as to the
existence of the subject matter or mistake as to its identity if a reasonable interpretation is
possible, it may be accepted by the court in an effort to maintain the agreement.
• the mistake, in order to avoid the contract at law, must have been based either upon a
fundamental mistaken assumption as to the subject matter of the contract or upon a mistake
relating to a fundamental term of the contract
• At law, in unilateral mistake, that is when a mistake of one party relating to the contract is
known to the other party, the Courts will apply the subjective test and permit evidence of the
intention of the mistaken party to be adduced no duty cast upon him to disclose to the other
circumstances which might affect the bargain known to him alone or to disillusion that other,
unless the failure to do so under the circumstances would amount to fraud.
• The law also draws a distinction between mistake simply nullifying consent and mistake
negativing consent the offer and the acceptance must be coincident or must exactly
correspond before a valid contract results.
• A promisor is not bound to fulfil a promise in a sense in which the promisee knew at the time
that the promisor did not intend it If by any means he knows there was no real agreement
between him and the promisee, he is not entitled to insist that the promise be fulfilled in a
sense to which the mind of the promisor did not assent
Rectification: The correction of a mistake in an agreement that would have rendered the
agreement impossible to perform.
Used to correct mistakes or errors that have crept into a written contract, either when a verbal
agreement has been reduced to writing, or when a written agreement has been changed to a
formal agreement under seal.
If the written agreement does not conform to the original agreement established by the parties,
the courts may change the written words to meet the terms of the original agreement they must
convince courts through evidence that the terms of agreement from writing from were
clear/unequivocal, that neither party was aware of error during signing and that there were no
intervening negotiations/changes during establishment/perp of written doc.
find more resources at oneclass.com
find more resources at oneclass.com
Document Summary
Chapter 11: failure to create an enforceable contract (pg194-208; pdf 227-241) Offer and acceptance, capacity, consideration, legality of object, and an intention to create a legal relationship all must be present, together with the requirements of form and writing, under certain circumstances. But even when these elements are present, the parties may not have an agreement that both may enforce until they also show that they both meant precisely the same thing in their agreement. As a consequence, recovery was only possible if the statute provided for recovery of the money paid, or there were some other conditions applied, and subject to available defences and equitable considerations,. Mistake of fact: mistake as to the existence of the subject matter of a contract or the identity of a party. If the parties are mistaken as to the existence of the subject matter of the contract, then the contract will be void.
