The Contractual Mistakes Act 1977 : the experience with a partial codification of the contract law

Abstract

In 1977 New Zealand enacted the Contractual Law of Mistake and departed in this context from the traditional Common Law. The legislature decided not to codify the whole contract law, but only a part of it: the law of contractual mistakes. After more than 25 years this research paper will examine the experiences in New Zealand with such a codification and evaluate whether a partial codification can be recommended. For this purpose the aims and intentions of the Reform Committee will be examined and it will be shown where problems in the adjudication arose.

The experiences that were made in New Zealand with a partial codification has recently gained even more importance, after the EWCA in the UK abolished the equitable doctrine of mistake and asked for a codification to achieve more flexibility in the law of mistake.

This paper will show, that the Contractual Mistakes Act was only a half-hearted approach to codify the contract law and to achieve the aims set out by the Law Reform committee.

The reason for the evaluation is, that the Act in in itself incoherent, because it offers the courts on the one hand a very wide scope in relation to the definition of mistake and possible remedies on the discretion-side and on the other hand constrains the possibility for the courts to grant relief by enacting the prerequisites in section 6 of the Act.

Because of this half-heartedness the Act caused great problems for the judges to achieve a a "just" result. This problem became apparent in the decision of Conlon v Ozolins were the Court of Appeal was forced to subsume a unilateral mistake, against the intention of the legislature, under the Act in order to achieve a "just" result. The Act took away from the judges the flexibility to achieve this "just result" under the traditional solution of Common Law and Equity.

Eventually, the Act has shown that the only way to codify the law of mistake is to codify the whole contract law and not only extracts of it. The reason for this assessment is that the law of mistake is related to different parts of the Contract Law, like contract formation and rescission of contract. It is not possible to codify one part without the other or distraction will be caused. Instead of such a partial codification it is better to stay with the traditional Common Law/Equity solution.