(v) Spontaneous and Induced Mistakes

Usually the claimant’s mistake will arise spontaneously, but sometimes it may have been induced by the defendant.[1] It is important to distinguish between spontaneous and induced mistakes because the nature of the mistake determines the test which will be adopted to determine whether the mistake was sufficient to vitiate the claimant’s intention to transfer a benefit to the defendant.

(vi) Ground of Restitution and Legally Effective Basis

Where a claimant has mistakenly transferred a benefit to the defendant, the test of mistake varies depending on the nature of the restitutionary claim. There are two routes to the recovery of such benefits. First, the claimant may have transferred a benefit to the defendant by mistake in circumstances where there was no legally effective basis for the transfer.[2] In such cases the claimant will simply need to establish that the defendant has been unjustly enriched at the claimant’s expense. Alternatively, the claimant may have transferred the benefit to the defendant in circumstances where there was a basis for the transfer, such as a contractual obligation or a deed. In such cases, in addition to establishing that the defendant was unjustly enriched at the claimant’s expense, the claimant will also need to establish that the basis is legally ineffective. Once this additional element has been established, restitution will follow. Typically, this will be by virtue of the mistake, but the interpretation of mistake to set aside a contract or a deed is different from how mistake is interpreted as a ground of restitution for purposes of the law of unjust enrichment. As will be seen,46 mistake is interpreted more restrictively when an otherwise legally effective transaction is set aside, by virtue of the policy in favour of protecting the security of such transactions. It is consequently important to distinguish mistake as a ground of restitution and mistake as a factor which vitiates an otherwise legally effective transaction.

  • [1] For analysis of the effect of induced mistakes, see p 187, below. 5 See Chapter 7.
  • [2] 46 See p 193, below.
 
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