Taylor v Johnson

Legally relevant facts:

(a) An option to enter into a contract for the sale of land with D was exercised
by P.
(b) D refused to proceed with the contract on the ground that she had
mistakenly believed the sale price to be $15,000 per acre, when in fact the
contract stipulated $15,000 as the total price for ten acres of land.
(c) P was found to be aware of Ds mistake and failed to bring the mistake to
Ds attention. Moreover, it was found that P intentionally concealed the
mistake so as to prevent D from becoming aware of it.
Legal issues in dispute:
(a) Whether a contractual mistake confers a right to rescind the contract.
Objective and subjective theories of contract
(a) Subjective theory: contract is void if one party enters into the contract
under a serious mistake as to the content or existence of a fundamental
term and the other party has knowledge of that mistake. The contract is
void for a lack of true consent.
(b) Objective theory: law is not concerned with the subjective intentions of
the parties, its only concerned with the outward manifestation of those
intentions.
(c) Following the subjective theory wound render a contract void ab initio,
both at common law and in equity. Following the objective theory would
render a contract valid at common law, but voidable in equity.
(d) It would be unfair to third party rights if the contracts become
automatically void.
Test for unilateral mistake:
(a) Starting point: Neither party can rely on own mistake to say that it was a
nullity from the beginning, even if the other party knew of the mistake.
(b) Special circumstances need to be shown before enforcement of the
contract becomes unconscionable. However, this is difficult to establish
unless there has been fraud or misrepresentation.
(c) Rescission is permitted in equity if (1) Party A is aware of Party Bs
mistake about either the content or subject matter of a term and (2) Party
A deliberately sets out to ensure that Party B does not become aware of
the mistake.
(d) Test for knowledge of mistake is objective and involves analysis of
circumstances that indicate the existence of the mistake. This involves:
whether D was aware of facts that would lead a reasonable person to
believe that a mistake had been made.
(e) This case is limited in application; specifically where the second party has
not materially altered their position and third party rights are not being
affected.
(f) The law is narrowly stated as it applies to the present case which involves
very specific facts.
Fraud/misrepresentation Common Law remedies

Unilateral mistake without fraud/misrepresentation Resort to equity

Q: can a contract be rescinded because the other party was aware of the
mistake? Ref Solle v Butcher. Is Solle v Butcher approved in Australia?
Is awareness enough or does there need to be more?
US and Canada: enforcement of contract where there has been an unilateral
mistake will be prevented where it would be unconscionable to do so or where it
was caused by the other party.

http://islandia.law.yale.edu/ayres/mutual.htm

Great Peace Shipping v Tsavliris Salvage

Legally relevant facts:
(a) D was contracted to provide salvage services to the ship Cape
Providence. Fearing for the safety of the crew whilst waiting for the tug
boats to arrive, D contracted with P, a nearby commercial vessel, to
provide assistance.
(b) A charter agreement was concluded between P and D, with the condition
that the charter be no less than five days.
(c) According to information obtained from a third party, Ps vessel was the
closest in proximity to the Cape Providence however this later turned out
to be false. D then decided to contract with another nearby vessel to carry
out rescue operations, before purporting to cancel the contract with P.
(d) D claims the contract is void/voidable because it was underpinned by a
mistake (that Ps vessel was the closet in proximity). P, on the other hand,
is suing D for specific performance.
Issues in dispute:
(a) Whether a mutual mistake of fact renders a contract void/voidable, either
at common law or in equity??
Determinations:
(a) If a contract is not void in common law, it cannot be void in equity because
of a common mistake i.e. the contract cannot be rescinded for common
mistake if it is not void at common law. i.e. equity offers no additional
remedies?
(b) The court declined to follow Solle v Butcher.
(c) Test: whether the mistake was so great that the contract is essentially a
different thing from what it was believed to be. If yes, then it is void.
What does fundamentally different mean?