National and Overseas Distributors Corporation (Pty) Ltd v Potato Board (1958 (2) SA 473 (A)

National and Overseas Distributors Corporation (Pty) Ltd v Potato Board (1958 (2) SA 473 (A)

Facts

The Potato Board invited tenders for the erection of a steel shed. The National and Overseas Distributors Corporation (Pty) Ltd (NODC) submitted a tender, which was mistakenly accepted by the Potato Board. The Potato Board later realized its mistake and informed the NODC that it had accepted the wrong tender. The NODC argued that a contract had been formed between the two parties and that the Potato Board was therefore bound to proceed with the contract.

Issue

The main issue in the case was whether a contract had been formed between the NODC and the Potato Board, despite the Potato Board's mistake.

Reasons

The Appellate Division of the Supreme Court of South Africa held that a contract had not been formed between the NODC and the Potato Board. The court found that the Potato Board's mistake was material and that the NODC was aware of the mistake.

Material mistake

A material mistake is a mistake that goes to the root of the contract. In this case, the Potato Board's mistake in accepting the NODC's tender was a material mistake, because it went to the very essence of the contract.

Awareness of the mistake

The NODC was aware of the Potato Board's mistake because the Potato Board had informed the NODC that it had accepted the wrong tender. The NODC therefore could not claim that it had entered into the contract in good faith.

Conclusion

The court held that the Potato Board's mistake was material and that the NODC was aware of the mistake. The court therefore concluded that no contract had been formed between the NODC and the Potato Board.

Summary

The case of National and Overseas Distributors Corporation (Pty) Ltd v Potato Board (1958 (2) SA 473 (A)) is a landmark case in South African contract law. The case is particularly important for its analysis of the following issues:

• The concept of mistake in contract law;
• The distinction between material and immaterial mistakes; and
• The effect of awareness of mistake on the formation of a contract.

Concept of mistake in contract law

A mistake is an erroneous belief about a fact that is relevant to the formation of a contract. Mistakes can be either material or immaterial.

Material and immaterial mistakes

A material mistake is a mistake that goes to the root of the contract and renders the contract void. An immaterial mistake is a mistake that does not go to the root of the contract and does not render the contract void.

Effect of awareness of mistake on the formation of a contract

If a party to a contract is aware of the other party's mistake, then the other party cannot claim that they entered into the contract in good faith. If the other party cannot claim that they entered into the contract in good faith, then no contract will be formed.

Impact of the Case

The case of National and Overseas Distributors Corporation (Pty) Ltd v Potato Board (1958 (2) SA 473 (A)) has had a significant impact on the law of contract in South Africa. The case has clarified the concept of mistake in contract law, the distinction between material and immaterial mistakes, and the effect of awareness of mistake on the formation of a contract.