Part 5: Mistake, Rectification & Misrepresentation

MISTAKE

"There is great un

certainty about what the present Anglo-Canadian law of mistake is. No two authors agree in their analysis and the same confusion exists in the case law." Ontario Law Reform Commission, 1987.

A contract requires a meeting of the minds, which Roman law called a consensus ad idem. If one or both parties have been mistaken about an element of the contract, then there is no consensus ad idem. But that does not necessarily mean that the contract is void. Such a rule could breed abuse. So the common law has tried to develop a fairly sophisticated set of rules for dealing with mistake. Unfortunately, as with so much of contract law, the final determination of what those rules are is still up in the air, moving with the changing currents of the courts.

In Seppanen v. Seppanen 59 BCLR 26, British Columbia's Supreme Court summarized the law by stating: "In common mistake, both parties make the same mistake. Each knows the intention of the other and accepts it but each is mistaken about some underlying and fundamental fact. In mutual mistake, the parties misunderstand each other and are at cross purposes. In unilateral mistake, only one of the parties is mistaken. The other knows, or must be taken to know, of his mistake." The court went on to use the example where, for instance, that Alan agrees to buy from Bob a specific picture which Alan believes to be a Picasso but which in fact is a copy. If Bob is ignorant of Alan's erroneous belief, the case is one of mutual mistake. But if he knew of it, it is a unilateral mistake.

When both parties are mistaken on a basic and fundamental element of the contract: the contract is void from the start if the mistake is of such significance that, in the words of English case law, it is a "false and fundamental assumption" of the contract (R. v. Ontario Flue-cured Tobacco Growers', 1965). For example, if the identity of a contracting party is a fundamental element of the contract, such as an athlete or artist, a mistake in this regard will void the contract. Another example is a contract involving something that, unbeknownst to the parties, has been destroyed.

"Where there is a contract for the sale of specific goods, and the goods without the knowledge of the seller have perished at the time when the contract is made, the contract is void." {Section 10 of the B.C. Sale of Goods Act.}

Sometimes, only one party will be in error. If the other party is aware of the misperception or should have been aware of the mistake, the contract may not be enforceable, even if the enlightened party did not cause the mistake. The law books call this a "unilateral mistake."

Mistakes of law would not give rise to judicial interference with a contract. Everyone is presumed to know the law (but see cases like Solle and Capital Quality summarized in subsequent pages).

One kind of mistake that give the courts difficulty involves a party who mistakes the kind of contract being signed. Because this type of "mistake" could be abused, it is severely limited by the common law. There is a legal maxim, non est factum, which means "not his deed" and a special defence in contract law to allow a person to avoid having to respect a contract that she or he signed because of certain reasons such as a mistake as to the kind of contract. For example, a person who signs away the deed to a house, thinking that the document signed was only a guarantee for another person's debt, might be able to plead non est factum in a court and on that basis get the court to void the contract.

Non est factum cannot be relied upon if the party could have easily have read the contract in question or if the party had a general idea as to the nature and purpose of the contract. The person pleading non est factum would also have to prove that they sincerely believed that the document they thought they were signing was fundamentally different from the one they actually signed. In order to protect the commercial system, the courts have consistently shown that in the presence of a signature by a person endowed with the capacity to contract, non est factum is a very difficult defence to hold in court.

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