A sale contract for a house was conditioned on the seller completing the registration of the rights to the house in his name within one year of the execution of the contract. When the registration of the rights under the name of the seller was not completed, the seller sought to cancel the contract while the purchasers sought its enforcement.
The Supreme Court held that there was a joint mistake by the parties to the sales contract, which justifies the cancellation of the contract. A mistake, as it stands in contract law, is a thought or belief of a party to a contract that does not correspond to reality. When the mistake forms the basis of a contract, in such a manner that without the mistake it could be assumed that the parties (both or one of them) would not have entered into the contract, and which is not a mistake in the viability of the transaction, then the contract can be canceled. In order to check that a mistake is not a mistake in the viability of the transaction, it is necessary to check whether the risk of mistake is something that one of the parties took upon itself at the execution of the contract. Here, the parties believed at the time of execution of the contract that the seller had proprietary rights in the house that he could transfer to the purchasers, and the aforementioned rights were the basis of the transaction and the motive for entering into it. When it turned out that the parties were mistaken, and that contrary to what they thought at the time of execution of the contract, the seller does not have proprietary rights in the house, and in order to receive such rights he must purchase them against almost the full value of the house, it is a mistake which cannot be viewed as a risk that the seller took upon himself and, therefore, justice demands that the contract be canceled.