Premium Essay

Mutual Mistakes in Contract Law

In: Business and Management

Submitted By dooscam
Words 903
Pages 4
I think this an unfortunate situation because a contract was entered into by both parties under false assumptions. A mutual mistake of material fact was made. From the information provided it does not seem it was done intentionally by the sales person so the contract can be rescinded. If the buyer, Josh Hartly, agrees to purchase a car with the new engine that is being manufactured then both parties can continue with the sales contract. One thing to be aware of would be the price difference, if any, between the 3.2 L V-6 engine car and the 3.5 L V-6 engine car.
Under certain circumstances, nondisclosure serves to make a contract voidable. As a general rule a party to contract has no duty to volunteer information to the other party. So if information was not asked for the nondisclosure of said information does not impose fraud liability or impair the validity of the contract. There are however exceptions to the general rule. In some states the seller must disclose the information of a serious defect or condition to the other party if it is unknown to them or unlikely they will discover it. But if the seller has no knowledge of the serious defect or condition, they cannot be held liable for failing to disclose it (Jennings & Twomey, 2014). With the information provided, I do not believe that either party acted unethically. The sales person was not aware of the change made by the manufacturer. Though I believe it is the job of the sales person to be up to date on the products he or she sells. More information would be needed, such as was this a recent change made to the engine by the manufacturer, if it was this could prevent the information from being available right away to the auto dealership. In this scenario it seems the sales person was providing all information that he or she was currently aware of.
The validity of a contract may be affected by the fact that…...

Similar Documents

Premium Essay

Law Contract

...CONTRACT LAW 2012/2013 CONTRACT LAW Content: Formation of contract. Vitiating factors. Terms. Privity of contract. Discharge of contractual obligations. Remedies. Limitation of actions. BEA1003/BEA1003A 2 Contract FORMATION OF CONTRACT A contract was defined in the 19th century by Sir Frederick Pollock as “A promise or set of promises which the law will enforce”. The requirements of a valid contract are: 1.Agreement. 2.Consideration. 3.Capacity . 4.Intention to create legal relations. 5.Form. 6.Legality. Sir Frederick Pollock BEA1003/BEA1003A 3 Contract FORMATION OF CONTRACT 1. AGREEMENT There is agreement when one party (“the offeror”) makes an offer which the other party (“the offeree”) accepts. An offer: Is a clear statement of terms on which the offeror intends to be bound. Can be made to a specified person, a group of people or to the general public. Must be communicated before it is effective. Must be distinguished from an invitation to treat. An invitation to treat is where one party holds him/herself out as being ready to receive offers which s/he may then accept or reject. BEA1003/BEA1003A 4 Contract FORMATION OF CONTRACT The following are examples of invitations to treat: Bidding at an auction . The display of goods in a shop window Fisher v Bell (1961) and on a supermarket shelf Pharmaceutical Society of Great Britain Ltd v Boots (1953). Advertisements (including goods/services advertised in emails and on www pages):......

Words: 6626 - Pages: 27

Premium Essay

Law of Contract

...13 MBA 16 – Business Law & Practice Module 01 - Law of Contract Coverage of: • Law of Contract: Definition, Essentials • Types of Contracts • Offer – Definition & Essentials • Acceptance - Definition & Essentials • Consideration – Definition & Essentials, Exceptions • Capacity of Parties • Free Consent • Quasi Contract • Legality of Object • Performance of Contract – Termination of Contract – Remedies for Breach of Contract Case Studies 1 The Indian Contract Act, 1872 The Indian Contract Act consists of the following two parts:  General principals of the Law of Contracts – covered under section 1 to 75; the principles apply to all kinds of contracts irrespective of their nature  Special kinds of contracts – covered under section 124 to 138 ; These special contracts are Indemnity & Guarantee (u/s124 to 147), Bailment & Pledge (u/s148 to 181) and Agency (u/s 182 to 238) in Chapter X – refer next Module 2) Section 76 to 123 – repealed by Sale of Goods Act, 1930 (refer Module 4) • • Section 239 to 266 – Chapter XI has been repealed by the Indian Partnership Act , 1932 ( not being covered separately; but major issues under different modules) The act does not affect any usage or custom of trade (u/s 1) – these prevail if reasonable & not illegal; an unique feature of this Act – most important branch of business law Some of the contracts not dealt with by the this Act are those related to Partnership, Sale of Goods (refer module 4),......

Words: 15475 - Pages: 62

Premium Essay

Contract Law

...DISCHARGEMENT OF CONTRACT The law of contracts forms a substantial part of our various relationships that can have some sort of influence over us on an almost daily basis – even when there is no physical contract in front of us we may still be privy to some sort of contractual obligation. Alternatively, if you’re a fan of social theorists such as Jean-Jacques Rousseau, you may argue that we’re also bound by ‘the social contract’, but we digress. Getting back to our original point, the law of contracts plays an enormous role in many of our interactions and for the most part, there may be no real concern in regards to the performance of a contract and an agreement will be completed accordingly. However, this does not mean that issues won’t arise within a contractual relationship, and there may be circumstances where you may need to discharge a contractwhich can be done by either one, or all of the parties to the agreement, and can be discharged by either: * BY PERFORMANCE * BY MUTUAL AGREEMENT * BY SUPERVENING IMPOSSIBILITY * BY OPERATION OF LAW * BY LAPSE OF TIME * BY LAPSE OF TIME BY PERFORMANCE Before exploring the general ways in which a contract can be discharged, the most obvious way in which acontract will come to an end, is when all parties fulfil their contractual obligations and the contract has been discharged via performance. Easy. Exceptions to performance Some people may be of the......

Words: 2112 - Pages: 9

Premium Essay

Contract Law

...Contract Law  LAW OF CONTRACT Name: Institution:   A contract can be simply defined as an agreement made by parties that is legally binding by its nature. It can also be defined as legally binding set of promises or promises (Lawrence & Elizabeth, 2007). A breach of any aspects of the agreement or a promise that constitutes a contract will lead to a subsequent remedy from the party that has been accused of the breach. The law of contract as shall be later discussed has provided for such remedies. The obligation to perform the duties that the law recognizes the contractual document or agreement specified. This defining characteristic of the contract is broadly known as enforceability. A contract is thus an agreement that is deemed enforceable. However, it is worthy to point out that while it is generally acceptable that all contracts are agreements, the reverse is not true. Not all agreements constitute a contract. The law of contract may classify contracts as follows: specialty or written contracts, contracts that are evidenced in writing, contracts that are under a seal and simple contracts. Specialty contracts are contracts, which the law specifies that they must be written. A formal structured document embodies a specialty or written contract. Examples of contracts that the law classifies as specialty contracts include insurance contracts like marine insurance, lease and hire purchase agreements and the contracts that will put in place proceedings that......

Words: 1685 - Pages: 7

Premium Essay

Law of Contracts

...sufficient value in the eyes of the law. For something to be legally sufficient, consideration for a promise must be either legally detrimental to the party receiving the promise (promisee) or legally beneficial to the one making the promise (Promisor). For example, it must be legally valid. Something of legal value must be given in exchange for a promise. It may be a return promise if it is performance, that performance may be an act other than a promise, or a forbearance refraining from action. Carbone Inc., begins construction on an office building and after 4 months demands an extra $60,000 on its contract. If the extra $60,000 is not paid, he contractor will stop working. The owner of the land, finding no one else to complete the construction, agrees to pay the extra $60,000. The agreement is unenforceable because it is not supported by legally sufficient consideration. Carbone Inc., had a preexisting contractual duty to complete the building construction. Adequacy of consideration refers to the fairness of a bargain. Normally, a court will not question the adequacy of consideration. Adequacy of consideration relates to how much consideration is given and whether a fair bargain was reached. Adequacy of consideration refers to the weight or substantiality of the act or promise given in exchange, such as, whether the amount being paid is an appropriate value. Since it is difficult to determine the actual worth of a promise or an act, the law will generally......

Words: 605 - Pages: 3

Premium Essay

Law of Contract

...QUESTION 1 IF ONE OR BOTH PARTIES ENTER INTO A CONTRACT UNDER SOME MISUNDERSTANDING OR MISTAKEN ASSUMPTION, IN WHAT CIRCUMSTANCES WILL THE COURT INTERVENE TO HOLD THE CONTRACT VOID AND UNENFORCEABLE ON THE GROUNDS OF MISTAKE? In contract law, a mistake is an erroneous belief made by parties when contracting. Mistakes are not generally enforceable at the law court and are often treated as void or voidable. Mistakes are generally irrelevant, but exception to this places great emphasis on operative mistake which includes common mistake, mutual mistake and unilateral mistake. Mistakes or misunderstanding may render a contract void when the following are presents; * Mistake of the law; When a party enters into a contract, without the Knowledge of the law in the country, the contract is affected by a mistake making it unenforceable on the grounds of ignorance. Note also that the ignorance of the law is not an excuse. CASE Lydia a foreigner entered into contract with Amina in Ghana with the view that, Amina should supply heroine on a contract basis for a token of GHC 5,637,600 for every supply made. Unknowingly to Lydia that it is illegal to trade heroine in Ghana. Hence the contract is void and loses its enforceability at the law court. * Mistake of Fact; This happens where both parties enter into an agreement under a mistake as to a matter of fact essential to the agreement, the contract is declared void. For instance, ‘A’ agrees to buy a certain horse from ‘B’. It turns......

Words: 3695 - Pages: 15

Premium Essay

Contract Laws

...Contract Laws Jerry Attric BUS311: Business Law I Instructor:  November 10, 2013 Contract Laws Today in this economy and financially unstable period, it is vitally important for an individual, an entity or organization to understand contract laws prior to entering into any form of contract. When looking at the laws of business there are many categories and an extremely broad range of topics. The topic of contracts within business law is extremely fascinating and very important to understand prior to entering into such contracts. “A contract is a legally enforceable agreement between two or more people.” (Rogers, 2012) There are many types of contracts to be aware of and there are numerous steps that are involved within each part of a contract, and must be understood and followed for the contract to be legal and binding. In our modern times people enter into contracts often times without even knowing thay have because there are so many different types of valid contracts. The following is a list of contracts that are entered into by companies and people on a regular basis. Implied, unilateral, bilateral, expressed, quasi, formal and simple contracts. An express contract is “formed by the express language of the parties—the actual words they use in their agreement—and can be either written or oral.” (Rogers, 2012) This particular contract is entered into without any written documentation and is a valid contract. Expressed contracts have several parts......

Words: 2118 - Pages: 9

Premium Essay

Contract Law

...Mutual Mistakes in Contract Law Caryn Williams Southern New Hampshire Business Law MBA--610-X4247 Geri Drelling July 13, 2014 Mutual Mistakes in Contract Law From a personal perspective, this situation is somewhat close to home. I worked as car sales professional for a year and learned many things about the process. In my opinion, Mr. Hartly should have done a bit more research about the models available. In my experience, the consumers I dealt with were more knowledgeable about the products being purchased. In many cases, the consumers would know more about the cars than I would. The internet provided the specifications about the engine and the proper pricing of the vehicle. However, when the consumer was negotiating the pricing and telling the salesperson what he wanted then the specific engine issue should have been addressed right away. As a matter of fact, the specifications of the vehicle are part of the sales presentation and should be given to consumer in the initial discussion. With my knowledge of car contracts, the sales contract is not able to be rescinded due to lack of information. The specifications of the car are on the sticker placed in the window and the information is fully disclose and displayed for the consumer. Contractual capacity is the ability to understand that a contact is being made and to understand its general meaning (Twomey ,2013). However, the fact that a person does not understand the full legal meaning of a contract does not......

Words: 677 - Pages: 3

Premium Essay

Contract Law

...Contracts Agreements between two entities, creating an enforceable obligation to do, or to refrain from doing, a particular thing. Nature and Contractual Obligation The purpose of a contract is to establish the agreement that the parties have made and to fix their rights and duties in accordance with that agreement. The courts must enforce a valid contract as it is made, unless there are grounds that bar its enforcement. Statutes prescribe and restrict the terms of a contract where the general public is affected. The terms of an insurance contract that protect a common carrier are controlled by statute in order to safeguard the public by guaranteeing that there will be financial resources available in the event of an accident. The courts may not create a contract for the parties. When the parties have no express or implied agreement on the essential terms of a contract, there is no contract. Courts are only empowered to enforce contracts, not to write them, for the parties. A contract, in order to be enforceable, must be a valid. The function of the court is to enforce agreements only if they exist and not to create them through the imposition of such terms as the court considers reasonable. It is the policy of the law to encourage the formation of contracts between competent parties for lawful objectives. As a general rule, contracts by competent persons, equitably made, are valid and enforceable. Parties to a contract are bound by the terms to which they have agreed,......

Words: 12598 - Pages: 51

Premium Essay

Mutual Mistakes in Contract

...concerns regarding the fuel economy of the 3.9 liter engine. Josh signs a contract agreeing to purchase a car with the 3.2 liter V-6 engine. What neither Josh nor the salesperson knew was that the manufacturer had already stopped manufacturing both the 3.2 liter and the 3.9 liter, and was equipping the cars with a newly designed 3.5 liter engine.  What do you think about this situation? Should parties to a sales contract be able to rescind a contract because of mutual mistake of fact? Why or why not? Did either party act unethically in this case? Why or why not? What application does the UCC have here? Finally, in the overall context of contract law, are there any winners or losers when a contract is rescinded based on mutual mistake of fact? Why or why not?  A mutual mistake is when both parties incorrectly believe an important fact to be true or the applicable law to be relevant. The important facts that affect or influence a parties decision are called material facts, and if there is mutual misunderstanding of these facts means contract can be void therefore without legal effect. (John Adamson, 2011) After looking at the facts it seems as though its is more of an error on behalf of the salesman and for me he should rescind the contract and take responsibility for the misunderstanding as it is not the consumers duty to know what engines are being manufactured. They both agreed to a contract that was created under the assumption that the 3.2 and 3.9 V6 engines were...

Words: 882 - Pages: 4

Premium Essay

Law Contract Law Assignment

...Question 1: Ian brings a claim for breach of contract against Ben. Discuss whether Ian and Ben formed an enforceable contract and whether Ian is likely to succeed with his claim An enforceable contract can be described as an agreement that can be enforced by the courts. However there are certain essential elements of a valid and enforceable contract. For this purpose, it is required that one party should make an offer and the other party should accept the offer. Similarly there should be a meeting of the minds. Other requirements of a valid contract our consideration and the capacity to enter into the contract. It needs to be noted that the law of contract provides that the party making the offer can revoke the same at any time before the other party has accepted the offer (Peel, 2007). At the same time, it is also required that the offer should be accepted unequivocally by the party to whom the offer has been made. In this regard, the postal role of acceptance provides that when post has been contemplative as the means of communicating the acceptance, the contract is considered to have been completed when the party accepting the offer, places the letter containing the acceptance in the mailbox. In this way, this rule is an exception to the general rule according to which, the acceptance is treated as concluded when the party making the offer receives the acceptance. The postal role was provided in the famous case of Adams v Lindsell (1818). In the same way, this rule has......

Words: 1092 - Pages: 5

Premium Essay

Contract of Law

...INTRODUCTION TO THE LAW OF CONTRACT DEFINITION  A contract may be defined as a legally binding agreement or, in the words of Sir Frederick Pollock: “A promise or set of promises which the law will enforce”. The agreement will create rights and obligations that may be enforced in the courts. The normal method of enforcement is an action for damages for breach of contract, though in some cases the court may order performance by the party in default.  CLASSIFICATION  Contracts may be divided into two broad classes:   1.    Contracts by deed A deed is a formal legal document signed, witnessed and delivered to effect a conveyance or transfer of property or to create a legal obligation or contract. 2. Simple contracts Contracts which are not deeds are known as simple contracts. They are informal contracts and may be made in any way – in writing, orally or they may be implied from conduct.   Another way of classifying contracts is according to whether they are “bilateral” or “unilateral”. 1. Bilateral contracts A bilateral contract is one where a promise by one party is exchanged for a promise by the other. The exchange of promises is enough to render them both enforceable. Thus in a contract for the sale of goods, the buyer promises to pay the price and the seller promises to deliver the goods. 2. Unilateral contracts A unilateral contract is one where one party promises to do something in return for an act of the other party, as opposed to a promise, eg,......

Words: 54394 - Pages: 218

Premium Essay

Purchase Contract and a Mutual Mistake

...Purchase Contract and a Mutual Mistake Sheldon Weyland Southern New Hampshire University Purchase Contract and a Mutual Mistake According to the prompt Josh Hartly and a salesperson negotiated an automobile purchase together. As part of the negotiations, Mr. Hartly, expressed concerns that a 3.9 liter V-6 would not be as fuel efficient as the 3.2 liter. After Mr. Hartly concluded negotiations with the salesperson, he signed a contract to purchase a car with a 3.2 liter V-6 engine. Following, the creation of the purchase agreement, it was discovered that the manufacturer had replaced both 3.2 liter and the 3.9 liter engines. Both engines were replaced by a newly designed 3.5 liter engine. However, neither Mr. Hartly nor the salesperson were aware of the change prior to entering into the purchase contract. This short paper will begin by examining the ability of these parties to rescind the contract due to mutual mistake. Next, the ethics and application of the Uniform Commercial Code (U.C.C.) will be further explained. Following these objectives, and in review of overall context of contract law, I will determine if any winners or losers are created when a contract is rescinded based on mutual mistake of fact. Finally, I will provide my own thoughts regarding the contract created between Mr. Hartly and the salesperson. Both Mr. Hartly and the salesperson, entered into a contract under a mutually mistaken understanding concerning on a basic assumption of fact, engine......

Words: 933 - Pages: 4

Premium Essay

Contract Law

...Elements of a Contract By Michael A. Petrat Business Law 206 Most people in our society are involved in contractual agreements of some kind. In most, if not all, aspects of law contracts can be found. Contracts are involved in family law, corporate law, employment law, litigation and real estate. Elements of a Contract: A contract is an agreement reached after sufficient consideration to do, or refrain from doing, some legal action. A contract is considered valid when two or more parties with capacity make an agreement involving valid consideration to do or to refrain from doing some lawful act. If these elements exist, the contract is valid. If one or more or these necessary elements is missing, the contract is void or voidable. In other words, it is not a true contract and therefore cannot be enforced. A void contract is no contract at all. It is not binding and no action can be maintained if it is breached. A disaffirmed is not necessary to avoid a void contract. If a contract can be rejected by one of the parties on legal grounds, it is called a voidable contract. A voidable contract is valid and binding unless the entitled party (the party who has legal grounds to reject the contract) voids it. A defect exists. The defect may be cured by ratification of the entitled party. The three basic components of a contract are the offer, the consideration and the acceptance. The following are six elements that are to help to determine whether or not the basic......

Words: 3196 - Pages: 13

Premium Essay

Explain the Difference Mistakes and Misrepresentation Found in the Contract of Law.

...Mistake Mistake exists where parties to a contract think that they have agreed when in actual fact they have not. For a party to be able to set a contract aside on the basis of mistake he has to establish the following. The mistake should be one of fact not law, the mistake must concern a material fact and it must be a reasonable mistake. The types of mistakes in the contract of law include unilateral mistake, mutual mistake and common mistake. Bilateral/common mistake This exists where both parties are mistaken .They would be thinking that they have agreed when in actual fact there is a common mistake on either side, courts have usually allowed both parties to set such a contract aside. The academic argument which is well founded is that such a contract should be treated as void because one of the requirements that is (consensus ad idem) is missing. An error on the part of both parties of a transaction regarding the same matter, such as if two people sign a contract under a certain understanding, while the contract actually conveys a different meaning than they each may have expected. That a mistake of law does not invalidate a contract was held in Ncube V Ndlovu 1985 (2) RLR 281. The appellant seduced a major daughter of the respondent. The appellant then signed an agreement undertaking to pay the respondent damages for seduction. He wanted to avoid the contract on the basis that he was mistaken as to the law that is he did not know that a father has no right to sue......

Words: 1400 - Pages: 6