CONTRACT LAW Author Institute 1. The issue in respect of this question requires an analysis on mistake and the effect of such mistake. The law on mistake would be discussed and related to the facts and a conclusion drawn accordingly. The first and foremost type of mistake is that of common mistake whereby a common mistake is existent amongst both parties or in other words the parties enter into a contract on a fundamental mistake…
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The facts at hand clearly do not point to common mistake. The mistake that is relevant in respect of the facts is one whereby consent is negative because one party is under a mistake. As Professor Goodhart (1941) states ‘there is no breach of the law of contract which is more uncertain and difficult than that which is concerned with the effect of mistake on the formation of a contract’. In respect of the facts at hand the mistake that is relevant is the one of identity of the other contracting party. Generally the identity of the other party is immaterial. In respect of the claims of ES against the third party an action under tort can be brought about whereby the English Law principle of nemo dat quad non habet (you cannot give what you do not have) would apply and if the person who sold the goods to the third party does not own any right to them then such goods have to be returned. As far as ES and IE are concerned under contract if there has been an assumption of false identity then a claim of fraud can also be made against the rogue. Fraudulent misrepresentation in this respect would lead to the contract being held voidable. Thus if there has been a mistake as to identity of the person who was under such mistaken belief can argue that the contract b set aside on the basis that the contract was entered into on the basis of mistake and thus is void tthereby having no legal effects whatsoever. Thus mistake is a better option as compared to fraud (Lord Nicholls in Shogun Finance Ltd. v. Hudson 2. In respect of mistake as to identity there is necessity to distinguish between contracts that have been entered into orally and those that have been entered into in writing. After the decision of Shogun the courts have found that where the dealing between the parties is fact to fact, there is a presumption in law that the parties intend on dealing with each other. Thus mistake as to true name would not be a sufficient reason. In respect of contracts in writing, the names of the parties bear greater significance because of the need for certainty in respect of written contract. Thus Lord Nicholls in Shogun stated that ‘there is no magic attaching to a misrepresentation made in writing rather than by word of mouth’. The reason for the difference in oral and contracts in writing is because of the fact that the innocent party would be unaware of who is standing in front of him when entering into the contract orally. The courts have therefore been given authority to determine the intention of the parties based on the documents and without any presumptions to such intentional. An important decision in respect of written contracts is the House of Lords in Cundy v. Lindsay3 whereby a dishonest person by giving wrong address and name of company dealt with an innocent party. The court deciding in favour of the claimants stated the reasoning that the order form had been signed with incorrect name and the claimants were aware of the name of the firm and had the intention of dealing with them. However, the courts in King’s Norton Metal Co. v. Edridge Merrett and Co. Ltd.4 held that where letters had been sent by a rogue the claimant purported to deal with the person sending the letter and not the company. The main distinction between the two earlier cited authorities is that in the latter no
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