Friday, August 16, 2013

Mistake in contract

Lee v. 1435375 Ontario Ltd., 2013 ONCA 516:

[37]       The formation of a legally binding contract requires a meeting of the minds –consensus ad idem. When the meeting of the minds is based on a common error as to some fundamental fact, the parties' agreement, viewed objectively, is "robbed of all efficacy": Ron Ghitter Property Consultants, at para. 13, referring to M.P. Furnston, Cheshire, Fifoot and Furnston's Law of Contract, 14th ed. (London: Butterworths, 2001).

[38]       The motion judge accepted the test set out by Lord Atkin in the famous decision of the House of Lords in Bell v. Lever Bros. Ltd., [1932] A.C. 161, at p. 225:

The proposition does not amount to more than this that, if the contract expressly or impliedly contains a term that a particular assumption is a condition of the contract, the contract is avoided if the assumption is not true.

[39]       In R. v. Ontario Flue-cured Tobacco Growers' Marketing Board, [1965] 2 O.R. 411, (C.A.), at para. 24, this court accepted the following definition taken from William R. Anson, Principles of the English Law of Contract and of Agency in Relation to Contract, 21st ed. by A.G. Guest (Oxford: Clarendon Press, 1959):

Where the parties contract under a false and fundamental assumption, going to the root of the contract, and which both of them must be taken to have had in mind at the time they entered into it as the basis of their agreement, the contract is void.

[40]       The Vendor does not take issue with the motion judge's statement of the law of common mistake, but asserts that she erred in her application of the law by using common mistake to re-allocate the risk contractually assumed by the Purchaser.

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