Law – 4 Law of tort | e-Consult

The distinction between mistake of fact and mistake of law is fundamental in contract law:

• Mistake of Fact

  • Occurs when a party is mistaken about a material fact existing at the time of contract formation.
  • Generally recognised as a defence only if the mistake is fundamental (i.e., it goes to the root of the contract) and the other party is aware of, or ought to have been aware of, the mistake.
  • Key cases: Bell v. Lever Brothers Ltd (1932) – only a mistake of such fundamental nature can render a contract void; Smith v. Hughes (1871) – unilateral mistake not sufficient where the other party is not at fault.
  • Effect: The contract may be declared void or voidable, restoring parties to their pre‑contract position.

• Mistake of Law

  • Involves an error regarding the legal consequences or interpretation of the contract.
  • Historically, English law has held that a mistake of law is not a valid defence (the “ignorance of law is no excuse” principle).
  • Exceptions are narrow, such as when the mistake is induced by a misrepresentation of law by the other party (e.g., Royal Bank of Scotland v. Etridge).
  • Effect: Generally, the contract remains enforceable; the mistaken party must perform or seek other remedies (e.g., rescission on grounds of misrepresentation).

In summary, a mistake of fact can void a contract if it is fundamental and the other party is at fault, whereas a mistake of law rarely provides a defence and usually leaves the contract intact.