QUESTION 2 PART B APRIL 2009

Issue
Whether the agreement made was not with free consent by both parties, Datin Siti and Cik Intan due to
mistakes.
Law
According to Section 10(1) of Contract Act 1950 (CA) , All agreement are contracts if they be made by
the free consent
Section 13 of Contract Act 1950 (CA) stated about two or more persons are said to consent when they
agree upon the same thing in the same sense. So, before doing a contract, both parties should be clear
of their intention or purpose going into a contract. If both of the parties clear about their intention.so it
can be said both party have consent on a contract they made. As an example, A want to make a contract
with B with a certain condition, and B agreed all the condition without leaving anything. Therefore,
there is contract between them because both of them have consent.
In the case of Tan Chin Swee & Anor V. Seri Ampangan Realty Sdn Bhd the plaintiffs had, apparently,
purchased a parcel of property measuring approximately 823 square feet for the purchase price of
RM63,800 positioned as a corner unit as shown in the floor plan. The defendant stated that it is an end
lot unit and not as claimed by the plaintiffs. However, the measurement and the purchase price are the
same, namely, 823 square feet with a price tag of RM63,800. The difference is in regard to the unit
number and its position and this occurred as a result of a mistake which was not realized by either party
to the sale and purchase agreement until approximately the month of January 2003. Judge held that the
contract is void.
In virtue of section 14 of the Contracts Act 1950, consent is said to be caused when it would not have
been given but for the existence of such coercion, undue influence, fraud, misrepresentation, or
mistake. In other aspects, an agreement is void where both parties are under mistake as to matter of
fact has been provided in section 21 of the Contracts Act 1950. To elaborate, the explanation to section
21 provides that an erroneous opinion as to the value of the thing which forms the subject-matter of the
agreement is not to be deemed a mistake as to a matter of fact. The circumstances under which the law
regards a fact as essential to the agreement are not clear under the Act. All the three illustrations to
section 21 only envisage situations where the subject matter was no longer in existence at the time of
the agreement. It appears from the illustrations that only a mistake as to the existence of the subject
matter of the agreement is a matter of fact essential to the agreement under section 21.However in
Sheikh Bros Ltd v Ochsner, the Privy Council extended the scope of mistake under section 21 to cover
the circumstances where both parties made a mistake as to the possibility of performing the agreement.
A mistake of fact made by both parties to the agreement may occur in the following circumstances. a)
mistake as to the existence of the subject matter of the agreement; b) mistake as to the identity of the
subject matter; c) mistake as to the quality of the subject matter ; d) mistake as to the possibility of
performing the agreement. For section 21 to apply, both parties to the agreement must be under a
mistake of fact. This was been illustrated in the case of Raffles v Wichelhaus where in this case the two
parties contracted for a sale of a cargo of cotton arriving in London by a ship called The Peerless, sailing
from Bombay. But unknown to both parties, there were two ships of the same name leaving from
Bombay at different times. They were both negotiating under a mistake and had in mind of different
ships. The court held that the contract was void for mutual mistake.

Application
In applying section 21 of the contract act 1950, for a mistake to be operative under this section, it must
be a mistake of both parties and it is as to a matter of fact essential to the agreement. It must also not
involve false statement.
There are three circumstances where fact essential to the agreement may occur. First, when mistake as
to the existence of the subject matter of the contract. Second, when the mistake as to identify of the
subject matter. Lastly, is when mistake to the possibilities of performing the contract.
In this case, Datin Siti believed that she was selling her nursery in Puncak Alam, whilst Cik Intan believed
that she was buying Datin Siti's nursery in Shah Alam. Both parties are at cross-purpose,
therefore, in fact, there are no agreement on the same thing in the same sense and in other words, no
consent between Datin Siti and Cik Intan.
The effect of mutual mistake in a contract as stated section 21 is that the contract is void. The contract
cannot be enforced and no rights can pass between the parties, and no obligation to be performed
under the contract. So, in this case Datin Siti cannot continue to proceeds the contract as the agreement
is already void and Cik Siti can cut off the deals.
In conclusion, the agreement was not made in free consent by both parties due to mistakes. The
contract is rendered void where by virtue of sections 66 and 73 the status quo must be restored.