No one is Perfect but No Mistake in Contracts, Please.

No No No It's not what you're thinking about. Law was my first choice. I am grateful for where am I now. Hahaha 

Contract of a mistake does not fulfill free consent.  A mistake is an error in understanding something. It either the mistake regarding the law or facts. The mistake should be in the facts of the contract, either regarding the concern. The mistake should be a major and significant matter of a contract, minor mistakes do not amount to mistake. Another important factor is, two (2) people should have made the mistake. A unilateral mistake does not amount to a mistake. Let's apply it to real-life illustrations. 

a)   Both parties agreed for a sale of the horse which dies on the date of the agreement. It is a common mistake.

b)   A party mistakenly loaded goods in a November ship that has the same name in contact, the second party loaded goods in a December ship. This is a mutual mistake, where parties committed two different mistakes on their part. 

c)   A marriage contract was signed by the bride when she mistakenly saw the groom. (identity mistake)

Let's read for a further detailed explanation on Mistake as in Contract Act 1950.

Section 21 of Contract Act 1950

An agreement is void if both the parties to the agreement are under a mistake as to a matter of fact essential to the agreement.

Section 22 of Contract Act 1950

A contact is not voidable because it was caused by a mistake as to any law in force in Malaysia, but a mistake as to any law not in force in Malaysia has the same effect as a mistake of fact.

What is the abovementioned mistake of fact?

A mistake of fact is made by both parties. It may occur in the following circumstances ;

(1) Mistake as to the existence of the subject matter

When unknown to both parties, the subject matter of the agreement had ceased to exist or has never been in existence at all at the time of the agreement, and the agreement is void.

(2) Mistake as to the identity of the subject matter

Arises where one party intends to deal with one thing and the other with a different one.

(3) Mistake as to the quality of the subject matter.

There is a valid contract despite the mistake, as the subject matter (oats) only differs in some quality, not substance.

(4) Mistake as to the possibility of performing the agreement.

Consent may be nullified if both parties believe that the contract is capable of being performed when this is not the case. The impossibility may arise either physically or legally, or commercially.

Legal impossibility arises where the contract provides for something to be done which cannot, as a matter of law, be done.

(5) Mistake as to the quantity of the subject matter.

Where both the seller and the buyer have a misunderstanding about the quantity or extent of the subject matter, This will render the contract void.

HOWEVER,

Section 23 of Contract Act 1950

A mistake caused by one of the parties to an agreement does not render the contract void. 

A mistake made by one party is called a unilateral mistake. The other party knows or must be taken to know of the mistake. The contract made under this situation is not void.

The contract shall not be void due to protecting bona fide purchaser for value without notice. This is because an operative mistake will render the agreement void, and the effect is that the subsequent bona fide purchaser will have no title to the goods as they will be liable for conversion. 

What about the effect and remedies of a contract made under a mistake?

Effect;

According to section 21 of the Contract Act 1950 agreement made under a mistake shall be void. 

While according to section 23 of Contract Act 1950, the agreement made under unilateral mistake is valid except for the contracts that relate to the term of the contract or identity of the party.

Remedies;

According to section 66 of Contract Act 1950, it was stated that;

    When an agreement is discovered to be void, or when a contract becomes void, any person who has received any advantage under the agreement or contract is bound to restore it or to make compensation for it to the person from whom he received it. 

From this section, it can be derived that when a contract is void, the party in which receives the advantage have to return it. This situation is also known as "restitution."

John Bourdeau defined “restitution” as 

    “the relinquishment of a benefit or the return of money or other property obtained through an improper means to the person from whom the property was taken”

While, according to section 30 of the Specific Relief Act 1950, it was stated that;

    When, through fraud or a mutual mistake of the parties, a contract or other instrument in writing does not truly express their intention, either party, or his representative in interest, may institute a suit to have the instrument rectified: and if the court finds it clearly proved that there has been fraud or mistake in framing the instrument, and ascertain the real intention of the parties in executing the same, the court may in its discretion rectify the instrument so as to express that intention, so far as this can be done without prejudice to rights acquired by third persons in good faith and for value.

    From this section, it was learned that rectification is an equitable remedy by which the court may amend the terms of a legal document, which, because of a mistake, fails accurately to reflect the intention of the parties to it.