common mistake occurred, and provided that the third party was acting in good faith in the
transaction, then the innocent third party’s rights are not affected in any way by the contract or
by the Act. This is a major development in the law of common mistake where third party rights
were given very little protection. Additionally, the section goes further by confining this
protection to third parties who acted in good faith in the transaction, thus the section cannot be
used as an instrument of fraud by third parties.
The New Zealand legislation can definitely be seen as a progressive re-statement of the law on
common mistake, for the following reasons. Firstly, the requirements in the Act that parties have
to satisfy the court to receive relief are more realistic than the Great Peace test, and to a large
extent much easier for the parties to satisfy than the Great Peace test. For instance the Great
Peace test states as one of its requirements that the non-existence of the state of affairs must
render performance of the contract impossible. This is very difficult to satisfy because usually
the contract can still be performed even with the presence of the mistake, thus once this is the
case the parties are barred from receiving relief. This is unfair to contracting parties. In contrast,
the Act has no such requirement. The parties simply have to prove that the mistake must have
caused some sort of disequilibrium between them based on what each placed their priorities on,
and it should have resulted in either placing a gain or a responsibility to the parties which they
had not bargained for, or agreed upon, at the time that the contract came into existence. This is a
fairly easy and realistic test to satisfy.
Secondly, as stated before, parties seeking relief under a contract are protected in the sense that
even if their contract expressly or impliedly provides for the assumption of the risk of a mistake,
they are not obliged to accept such a risk, which is not covered by the common law. Thirdly, the
remedies open to the parties under the legislation are far greater than those offered by the
common law. Fourthly, the Act also confers protection on innocent third parties to a contract
based on common mistake, which the common law is deficient in, and also regulates such
protection.
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