Common mistake (In the context of contract law)

A common mistake is the circumstance where all parties to a contract are “mistaken” regarding a fundamental matter of fact. If both parties are under the same misapprehension (e.g. the existence of goods under a sale of contract) it may render the contract void at law or, in some circumstances, voidable in equity.

These types of mistakes normally occur at the initial stage of contracting and parties enter into a contract on the basis of the facts that are believed to be true, but however, in reality, are not.

There are generally three types of fact that may, if erroneous, lead to a contract being void or voidable for common mistake:

  1. The existence of a the subject matter of a contract: see McRae v Commonwealth Disposals Commission (1951) 84 CLR 377, whereby it was held that only in circumstances where both parties had actual knowledge of a fact, rather than reliance on the other party, will a common mistake occur.
  2. The quality of the subject matter of a contract: see Bell v Lever Brothers Ltd [1932] AC 161, whereby a contract in these circumstances will only be void or voidable for common mistake if the quality of the subject matter is fundamentally or essentially different from what was contacted for.

The recording of the parties intentions: see Pukallus v Cameron (1982) 180CLR 447, whereby only if there is a mistake common to both parties under a written document and the intention of both parties is different to what is in the written document, then a contract may be void or voidable.