Common mistake contract law australia

Mistake

Overview

Mistake is a complex area of contract law. As a general rule, being mistaken about some aspect of a contract will not provide a party with a right to escape contractual obligations - even if that mistake is fundamental.

General rules

There are four forms of mistake that may provide contractual remedies in limited circumstances; common mistake, mutual mistake, unilateral mistake and non est factum.

• A common mistake occurs when both parties are mistaken about the same thing (eg, the authenticity of a piece of art); it is very rare for a common mistake to give rise to remedies at common law, although in equity remedies of rescission or rectification may sometimes (though rarely) be available (however see Great Peace Shipping).
• A mutual mistake occurs when both parties are mistaken but about different things; this has arisen rarely in practice and the legal position is unclear - often where such mistakes exists the agreement might be too vague or uncertain to be enforceable without the need to rely on mistake as a separate cause of action. It could also simply be treated as a unilateral mistake by both parties about different issues.
• Unilateral mistake is more common; it occurs when one party is mistaken about some aspect of the contract but the other is not. It is rare for the common law to provide a remedy for unilateral mistake, but equity will intervene more frequently - equity does, however, require some improper conduct on the part of the unmistaken party whereby that party seeks to prevent the other becoming aware of the mistaken. Often where this is the case there will be some misleading conduct involved which will provide separate - and superior - remedies. The relevant remedy where an actionable mistake exists is rescission or rectification.
• Non est factum(it is not my deed) occurs rarely and is established where a party is mistaken about the nature of the document they are signing - essentially that, through no fault or neglect of their own they were unable to understand the meaning or the significance of the document they were signing.

Non est factum

As a general rule - and subject to certain consumer protection laws (for example, those making void unfair terms in consumer contracts notwithstanding the agreement of the parties - parties are bound by the documents they sign, whether or not they have read or understood them. There is, however, one key exception to this rule which operates where the signatory can demonstrate he or she did not understand the very nature of the document they signed. This is known as a plea of ‘non est factum’ (it is not my deed).