Contract Law. Questions and Answers - Essay Example

In such case the contract is void whether it is the non-existent subject matter of the agreement ( Res Extincta) or it is regarding the contract of purchase of own property(Res Sua) . The case of unilateral mistake is where only one party is mistaken. This can be by mistake as to the terms of the contract and also by the mistake as to the identity in which the first party thinks of the third party as the second party. Where the parties are inter prae sentes (face to face) there is a presumption that the mistaken party intends to deal with the other person who is physically present and identifiable by sight and sound, irrespective of the identity which one or other may assume.

In the case of mutual mistakes where the parties misunderstand each other's intentions and are at cross purposes and if the transaction is totally ambiguous so that it can be assumed that there will be no consensus ad idem (agreement as to the same thing) and the contract will be void: Moreover mistake related to documents also leads the contract voidable. If writing contracts were costless, the parties would specify which of their beliefs were crucial to the agreement and condition performance of those beliefs, just as they would avoid all ambiguity in defining performance by including all details that might be relevant (1) Since re Since reading and writing contracts is costly, courts sometimes fill gaps in incomplete contracts by supplying the omitted terms, asking what the parties would have specified ex ante had the contract writing been costless.

When beliefs are mistaken, the court might follow a similar rule, not by adding omitted terms (since the contract is unambiguous), but by modifying the contract to express the true intentions of the parties. or, the court could reform the contractual obligations by voiding the contract, leaving the reconstructing to the parties involved. Reforming or voiding contracts, however, goes beyond the gap-filling function in which courts customarily engage; it is an almost paternalistic change in the contract's express terms.

In the same manner, the Court always tries to make distinction between incorrect belief and mistake to empty the concept of the mistake from its original meaning. In the opinion of the Court mutual mistake will be used to announce a decision not to enforce the promis