Situations where there is a material mistake that precludes consensus ad idem between the parties
Chapter 1 introduced the dual basis of contracts in modern South African law
Will theory
Requires actual, subjective agreement between the parties for contractual liability to arise
Reliance theory
Provides that when the parties are not in agreement, contractual liability nevertheless may arise on the basis that the one party led the other party into a reasonable belief that consensus had been reached
The reliance theory has been applied in several guises as a corrective mechanism in cases of disagreement or dissensus
Mistake (in contract law)
Situation where a contracting party acts while under an incorrect impression regarding some or other fact that relates to and affects the contract between the parties
Material mistake
An error that vitiates or negates actual consensus between the parties
Non-material mistake
A mistake that does not exclude actual agreement between the parties because it does not relate to an element of consensus
Types of mistake
Unilateral
Mutual
Common
Unilateral mistake
Only one party is mistaken, while the other party is aware of their mistake
Mutual mistake
Both parties are mistaken about each other's intention and are at cross-purposes
Common mistake
A mistake that is shared by the parties, resulting in a contract being void as it rests on a common underlying supposition that is later revealed to be incorrect
Irrelevant mistake
A mistake that did not affect the mistaken party's decision to enter into the contract
Relevant mistake
A mistake that influenced a party's decision to conclude the contract
The distinction between material and non-material mistake is crucial to the question of consensus
Material mistake
An error that vitiates or negates actual consensus between the parties because it relates to or excludes an element of consensus
If a mistake is material, the issue is one of dissensus and the principles of reliance have to be applied
If a mistake is non-material, a consensual contract exists and there is no need to apply the principles of reliance
Materiality has a very specific connotation in the context of mistake and should not be confused with materiality as applied to other areas of the law of contract
Elements of consensus
Serious intention to contract
Agreement as to the material aspects of the contract
Consciousness of agreement
Serious intention to contract (animus contrahendi)
The parties must intend to be legally bound by the agreement
Lack of intention to be legally bound
Making a declaration to contract in jest (rixa)
Intending a social agreement (gentlemen's agreement)
The law judges simulated juristic acts in accordance with the actual intention of the parties and not the simulated contract
Agreement as to the material aspects of the contract
The parties must be ad idem regarding the persons between whom the obligations are to be created and the content of the obligations
Material mistakes regarding the contract
Mistake about the parties to the contract
Mistake about the subject matter of the contract
Mistake about a contractual clause that permits unilateral variation or release from liability
Consciousness of agreement
The parties must be aware of each other's intention for a consensual contract to arise
Lack of conscious agreement
Offeree not aware of the offer before accepting it
Offeror not aware of the acceptance
Consensus
Parties must not just have coinciding declarations of intention but must also be aware of each other's intention for a consensual contract to arise
A mistake that precludes conscious agreement between the parties will be material
The offeree must be aware of the offer before he can accept it and, likewise, the offeror must be aware of the acceptance for a true meeting of the minds (concursus animorum) to occur
Bloom v American Swiss Watch Co.
Appellant provided information to claim a reward while unaware of the promise of reward, so there was no consensus and hence no contract
Non-material mistake
While usually influencing a party's decision to enter into a contract, does not affect an element of consensus
Diedericks v Minister of Lands
Defendant's mistake related to its motive for making the offer, and did not exclude mutual assent (consensus) between the parties, so a valid contract existed
Just because the parties have reached consensus and a contract has arisen does not necessarily mean that a mistaken party is without legal recourse if the mistake was induced by the misrepresentation of the other party
Traditional classifications of mistakes
Error in corpore (material mistake concerning the subject matter)
Error in negotio (material mistake relating to the true nature of the contract)
Error in persona (material mistake regarding the identity of the other party)
Error in substantia/qualitate (not material mistake regarding an attribute or characteristic of the subject matter)
Error in motive (not material mistake as to the reason for entering the contract)
The traditional list classifying mistakes is not exhaustive, the real focus should be on whether a particular mistake relates to the content of an obligation (an operative mistake) or merely to the motive for incurring such an obligation (a non-operative mistake)
Whether a mistake is one of fact or law, the key question is whether the mistake only affected the motive for entering into the contract
Unqualified acceptance of the will theory as the basis for contract would have extremely unfair results, as a party could set up a mistake in advance and then argue lack of agreement should he or she later wish not to be bound
Denial of contractual liability in instances where dissensus is not readily apparent to all parties could result in undue hardship for a party who has incurred expense in reasonable reliance on the existence of a contract
In South African law, the will theory is not applied without qualification due to these limitations