Taylor v Johnson (1983) 151 CLR 422

Facts: Johnson granted an option to Taylor to purchase 10 acres of land for a total price of $15,000. The option was exercised and a contract was entered into for the sale of the land for $15,000. J refused to perform the contract, as she claimed that when she granted the option and entered into the contract she believed the price was $15,000 per acre ($150,000 total). T appears to have known that J was mistaken as to price and took steps to inhibit J’s discovery of the correct price (for example, by pretending not to have a copy of the contract with him). At the time of contract, the land value was estimated to be $50,000 but it would have increased in value to $195,000 if a proposed rezoning of the land took place.

Held: The contract was not void at common law. Johnson couldn’t rely on her own mistake to make the contract void at common law. There is a general proposition that neither party can rely on their own mistake to make it a nullity from the beginning (especially re a term of a written/formal contract – it doesn’t make sense to find that there was no contract in the first place). The Court must look instead at whether equitable relief is available. The contract was voidable in equity. A unilateral mistake was made out. Hence, the contract can be rescinded.

Held (Mason ACJ, Murphy and Deane JJ, at 432): ‘[A] party who has entered into a written contract[1] under a serious mistake about its contents in relation to a fundamental term will be entitled in equity to an order rescinding the contract [2] if the other party is aware that the circumstances exist which indicate that the first party is entering the contract under some serious mistake or misapprehension about either the content or subject matter of that term and [3] deliberately sets out to ensure that the first party does not become aware of the existence of his mistake or misapprehension.’