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Chapter 8

BU231 Textbook Notes Chapter 8.docx

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Shelley Mc Gill

Chapter 8 The narrow meaning of mistake  Mere errors in judgement do not legally justify avoiding one’s legal obligations under a contract  If a mistaken party cannot restore the subject matter (ie. the goods) of the contract to the other party, then they lose the right to rescind (undo/ revoke the contract) Void and voidable contracts  If there is a mistake, it may be void, voidable or sometimes, corrected  Void contract: If there are 2 contracts between 3 people and the first contract becomes void, the second automatically becomes void as well  Voidable contract (not void yet): if there are 2 contracts between 3 people and the third party receives the goods already, the “victim”/ plaintiff cannot recover their goods o Third party purchaser must be innocent and paid value for the goods Mistakes about the terms Words used inadvertently  Unilateral mistake = a situation where only one of the parties believes there is a mistake in the contract o May be voidable when it is clear that the first party made a mistake in expressing the terms of the contract o Court considers whether the other party should have realized that a mistake was made Errors in recording an agreement  Rectification = correction of a written document to reflect accurately the contract made by the parties  The party claiming that the arrangement was improperly recorded may ask the court for rectification if o The court is satisfied that there was a complete oral agreement b/t the parties o The parties did no emerge in further negotiations to amend the contract o The mistake in the written document may have, but does not have to have, occurred as a result of fraud o When the written document was signed, the defendant knew or should have known of the mistake and the plaintiff did not o Any subsequent attempt to enforce the inaccurate written document would be equivalent to fraud Misunderstandings about the meanings of words  There may be disagreements about the interpretation of words  Mutual mistake = a situation in which both parties believe a mistake exists in the contract but their understandings of the mistake are different o Contract will become void Mistakes about the subject matter Mistake about the existence of the subject matter of a contract  Common mistake = a situation in which both parties believe the same misunderstanding or mistake about the contract  Occurs when the subject matter has been destroyed  Contract will be held void Mistake about the value of the subject matter  If the mistake was so substantial that it changes the quality of the subject matter, it may be rescinded  If the purchaser moves quickly, contract may also be voidable Mistakes about the identity of a party to contract  Unilateral mistakes  If an existing identity is assumed (rather than a fabricated one) = void  If identity is fabricated/ doesn’t exist = voidable Mistakes about the nature of a signed document Non Est Factum  “its not my doing”  A careless signer cannot avoid liability, even if they could not read Misrepresentation Contract vs. tort  Tort: o Is a tort when made fraudulently or negligently, but not innocently o If they later discover their error, they must inform the other party or it will become a tort
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