Mistake 

Mistake is narrower than students expect. A bad bargain is not a mistake, and a party who misjudged value, quality or prospects has no remedy on this ground. The doctrine addresses a small class of cases where the parties' agreement rests on a false assumption so fundamental that the law declines to hold them to it.

Because it is narrow, always consider misrepresentation and the statutory prohibition on misleading conduct alongside it — those routes are usually stronger.

Common mistake

Both parties share the same mistaken assumption. At common law the contract is void only where the mistake makes the subject matter essentially different from what was supposed — the classic instances being subject matter that never existed, or that already belonged to the buyer.

The threshold is high. A shared mistake about quality, value or profitability will generally not suffice, however serious its consequences.

Equity's role here is contested in Australia. There is authority for a broader equitable jurisdiction to set aside on terms, and authority resisting it; treat the scope of equitable relief for common mistake as unsettled rather than stating a confident rule.

Mutual mistake

The parties are at cross-purposes — each means something different, and their intentions never meet. If, applying the objective test, no single agreement can be identified, there is no contract. Often the objective test does yield an answer, and the apparent mistake disappears.

Unilateral mistake

One party is mistaken and the other knows, or ought to know, of the mistake. Mere silence about a bad bargain does not engage the doctrine; the mistake must generally concern a term of the contract, and the other party's knowledge is essential. Where those conditions are met, equity may refuse specific performance or set the contract aside. In Taylor v Johnson (1983) 151 CLR 422,¹ the High Court set aside a land sale contract on this basis: the vendor was mistaken about the price term, and the purchaser knew of the mistake and "snapped up" the bargain rather than drawing it to the vendor's attention.

Mistake as to identity

Where a party is deceived about who they are contracting with, the analysis turns on whether identity was material to the agreement — particularly in face-to-face dealings, where the presumption is that a party intends to deal with the person in front of them. These cases usually arise as contests between an innocent seller and an innocent third party who bought from the fraudster.

Non est factum

A narrow plea that a signed document is not the signer's deed at all, available where the signer was unable through no fault of their own to understand the document's fundamental character. It is deliberately hard to establish, because it defeats the reliance others place on signatures.

Rectification

Where the written document fails to record what the parties actually agreed, rectification corrects the document, not the bargain. It requires clear evidence of a common intention continuing to the time of execution.

Applying this in a problem question

1. Identify precisely what each party believed and when.
2. Classify the mistake: common, mutual or unilateral.
3. Apply the high common law threshold before turning to equity.
4. Consider rectification if the problem is the document rather than the agreement.
5. Run misrepresentation and misleading conduct in the alternative — usually the better arguments.

Where the authority sits

Common law and equity, with the equitable scope genuinely unsettled in Australia. Say so rather than asserting a rule the High Court has not endorsed.