For a Unilateral Mistake to Be Operative It Must Relate to the Terms of the Contract

Using the Singapore High Court in Chwee Kin Keong & Others v Digilandmall.com Pte Ltd [2004] 2 SLR 594 as a precedent with similar context, we initially considered explored the possibility of the situation being one of the operative unilateral mistake which would discharge Mimi from any obligations in fulfilling the contract which Betty claimed to exist. For a unilateral mistake to be operative, it must relate to the terms of the contract. This type of mistake occurs where one party is aware of the mistake and takes advantage of the other party’s error. Such a mistake could render the contract void. However, we subsequently dismissed the possibility of a unilateral mistake in Mimi’s case due to the absence of a binding contract as reasoned below.

Absence of a Binding Contract

In order to determine if there is an existence of a contract or if an agreement has been reached in the first place, we refer to Lord Phillips of Worth Matravers in Shogun Finance Ltd v Hudson [2003] 3 WLR 1371 at [123], whereby it was stated that:-

A contract is normally concluded when an offer made by one party (“the offeror”) is accepted by the party to whom the offer has been made (“the offeree”). Normally the contract is only concluded when the acceptance is communicated by the offeree to the offeror. A contract will not be concluded unless the parties are agreed as to its material terms. There must be “consensus ad idem”. There is one important exception to this principle. If the offeree knows that the offeror does not intend the terms of the offer to be those that the natural meaning of the words would suggest, he cannot, by purporting to accept the offer, bind the offeror to a contract: Hartog v Colin & Shields [1939] 3 All ER 566.

On 3rd May, upon realizing the error made in the advertisement, Mimi sent out an email to Betty to clarify that it was a typographical error which was advertised. Betty was always aware of the fact that it was not Mimi’s actual intention to sell the Duperman Figurine Model for $500. Based on the above, our opinion is that there is no existence of a binding contract because Betty could not bind Mimi to a contract since she was aware of the error.

Invitation To Treat

However, Betty could try to argue that she understood the advertisement as an offer based on the natural meaning of the words “You may accept the following offer…” posted the online advertisement and therefore a contract was concluded when she sent an acceptance of offer back to Mimi on 1st May.

To counter this argument, our opinion is that, a genuine offer must first be distinguished from an invitation to treat. An offer may be defined as a statement of willingness to contract on specified terms made with the intention that, if accepted, it shall become a binding contract. An invitation to treat, on the other hand, is not an offer which is capable of being turned into a contract by acceptance. It is a mere invitation by one party to the other party to make an offer, where the first party is free to accept or reject.

Advertisements of goods for sale, including web advertisements, are generally viewed as invitation to treat (per Chwee Kin Keong & Others v Digilandmall.com Pte Ltd [2004] 2 SLR 594 at [93]), as placing an advertisement on the Internet is essentially advertising or holding out to the world at large. However, there are also exceptions to this principle. Advertisements may be also construed as offers if they are of the unilateral type, such as offer for rewards because it is a contract brought into existence by the act of one party in response to a conditional promise by another (in Carlill v Carbolic Smoke Ball Co [1892]). Therefore, we would advise Mimi that her online advertising would not be considered as an offer, or rather, it is merely a general example of an invitation to treat.

Intention to Create Legal Relations

We would also like to add that generally advertisements, referred to as invitation to treat, can only be considered mere declarations of intention and should not be legally binding or have any legal consequences. Once again, using this argument, we would deny an existence of a contract due to the lack of intention to create legal relations.

Acceptance of Offer

Further to the arguments above, we refer to Betty’s email and Mimi’s auto-generated reply dated 1st May. It could be argued that they are Betty’s offer to buy the Duperman Figurine Model and Mimi’s acceptance of the offer respectively. The issue that arises in this situation is whether the auto-generated email can be considered as an acceptance to Betty’s offer. Although s15 ETA (2010) states that an offer and acceptance of offer through the use of automated-generated email system can form a contract, it is evidently clear that the context of Mimi’s auto-generated reply does not indicate an acceptance to Betty’s offer. Rather, it seems more than a provision of information to inform the sender that the email has reached its designated email address.

Conclusion

With reference to the above, we summarize our points hereinafter: (1) Mimi’s online advertisement was merely an invitation to treat made to the world at large, instead of a unilateral contract; (2) Betty cannot bind Mimi to a contract which she claimed to exist due to her actual knowledge of the typographical error; (3) there is no intention to create legal relations in the online advertisement; and (4) the auto-generated reply cannot be regarded as an acceptance to Betty’s offer to buy the Duperman Figurine Model. Based on these arguments, a court would be more likely to find that there is no binding contract between Betty and Mimi, and if so, Mimi will have no obligations to fulfill any contract which Betty claimed to exist.