Cameron Miranda
Mistakes in contract law are false beliefs about a contract, which may concern terms, laws, or information relevant to a binding contract. Mistakes can make a contract void or voidable, depending on the type of mistake and its impact on the agreement. There are three main categories of mistakes: unilateral, mutual, and common. A unilateral mistake occurs when only one party is mistaken about the subject matter or terms of the contract, while a mutual mistake occurs when both parties are mistaken about the same material fact within the contract. A common mistake occurs when both parties hold the same mistaken belief about the facts. Other types of mistakes include mistake of law and mistake of fact, with the former referring to a false understanding of the law and the latter referring to a mistaken understanding of an important fact. When answering a question on mistake in contract law, it is important to identify the type of mistake, its impact on the agreement, and the potential remedies or consequences.
| Characteristics | Values |
|---|---|
| Number of types of mistakes | Three: unilateral, mutual, and common |
| Number of categories of mistakes | Two: mistake of law and mistake of fact |
| Unilateral mistake | A mistaken belief made by one party in a contract |
| Mutual mistake | Both parties are mistaken about the same material fact within their contract |
| Common mistake | Both parties hold the same mistaken belief of the facts |
| Mistake of law | A false understanding or interpretation of a law that affects the contract being signed |
| Mistake of fact | A mistaken belief other than a mistake of law, e.g. erroneous beliefs about the meaning of a term |
| Collateral mistake | A mistake that "does not go to the heart" of the contract |
| Remedy for a mistake | Contract rescission, contract reformation, or reparations |
| Void contract | No choice of the parties whether or not to void the contract |
| Voidable contract | The contract can be voided but is not automatically void |
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Mutual mistake
In contract law, a mistake is when there is an erroneous belief at contracting that certain facts are true. Mistake is a defence, and if raised successfully, can lead to the agreement in question being found void or voidable.
A mutual mistake occurs when both parties to a contract are mistaken about the same material fact within their contract. They are at cross purposes, and there is a meeting of the minds, but the parties are mistaken. Hence, the contract is voidable. Collateral mistakes will not afford the right of rescission. For a mutual mistake to render a contract void, the item the parties are mistaken about must be material. When there is a material mistake about a material aspect of the contract, there is the question of the assumption of the risk.
For example, in a case where a person sells a cow for $80 because they think it is infertile and the cow turns out to be pregnant and worth $1000, the contract would be void. This is because there was a mutual mistake as to a matter of fact essential to the agreement.
To invoke the doctrine of mutual mistake, a party must present proof that the agreement, as expressed, does not represent a "meeting of the minds" between the parties in some material respect. The mutual mistake must be substantial and exist at the time the parties enter the contract. To establish mutual mistake, the moving party must overcome a heavy presumption and prove, by clear and convincing evidence, that the agreement did not express the intentions of either party.
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Unilateral mistake
A unilateral mistake occurs when only one party to a contract is mistaken about the terms or subject matter contained in the contract agreement. This type of mistake is generally more common than other types of contract mistakes, such as a mutual mistake, where both parties are mistaken.
In order to use the defence of a unilateral mistake to make a contract voidable, a party must prove the same requirements as the mutual material mistake defence, with an additional requirement that can be satisfied in one of three ways:
- The effect of the mistake is such that enforcement of the contract would be unconscionable.
- The other party knew or had reason to know of the mistake.
- The fault of the other party caused the mistake.
For example, in Larsen v. Johannes (1970), a proofreading error made by a newspaper resulted in a car dealer advertising a vehicle for sale for $12,000 below its usual price. The California Supreme Court ruled that, despite the unilateral mistake, it would be unfair to require the car dealer to perform the contract.
Rescission (cancellation of the contract) is only available if the non-mistaken party knew or should have known about the unilateral mistake. Reformation (rewriting the contract) is available if the non-mistaken party was unaware of the mistake.
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Common mistake
A 'common mistake' in contract law refers to a situation where both parties hold the same mistaken belief about the facts. This is also referred to as a non-agreement mistake as both parties have reached a valid agreement but wish to nullify it due to a mistake regarding the terms or subject of the agreement.
For a common mistake to void a contract, the mistake must be fundamental to the contract, rendering the identity of the subject matter different from what was agreed upon and making the performance of the contract impossible. An example of this is the case of Strickland v Turner (1852) 7 Ex 208, where a contract was made for the annuity of a person’s life, but the person was already dead. This mistake was sufficiently fundamental to the decision to enter the agreement, and so the contract was void.
It is important to note that a mistake about the quality of a subject matter is generally not considered fundamental enough to void a contract. For example, if a pair of boots were purchased under the belief they belonged to a famous footballer, but this was later found to be untrue, this would be a mistake as to the quality of the subject matter. This type of mistake does not render the contract impossible to complete.
The doctrine of mistake cannot be used simply because a party later regrets entering into a contract or finds that the deal is less favourable than anticipated. Instead, the mistake must relate to a fundamental assumption on which the contract was based, and the mistake must have a material effect on the agreed-upon exchange.
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Mistake of law
Mistake in contract law refers to a situation where one or both parties have a false belief about a contract. Mistakes in contract law can be divided into three main categories: unilateral mistakes, mutual mistakes, and common mistakes.
A unilateral mistake occurs when only one party to a contract is mistaken about the terms or subject matter contained in a contract. This type of mistake is more common than other types of mistakes. Ordinarily, a unilateral mistake does not make a contract void. However, a contract might be voidable due to a unilateral mistake if one party relied on a statement of material fact by the other party that they knew or should have known was mistaken.
A mutual mistake occurs when both parties to a contract are mistaken about the same material fact within their contract. In this case, there is a meeting of the minds, but the parties are mistaken, and the contract is voidable. For a mutual mistake to void the contract, the mistaken fact must be material, meaning central to the purpose of the contract.
A common mistake occurs when both parties hold the same mistaken belief about the facts. A common mistake can void a contract only if the mistake is sufficiently fundamental to render the contract impossible to perform.
Mistake of fact occurs when both parties enter into an agreement under a mistake as to a matter of fact essential to the agreement, rendering the agreement voidable. An erroneous opinion as to the value of the thing that forms the subject matter of the agreement is not considered a mistake of fact.
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Mistake of fact
There are two types of mistake of fact: unilateral mistake and mutual mistake. A unilateral mistake occurs when only one party is mistaken about an essential contract term, while a mutual mistake occurs when both parties share the same erroneous belief. Unilateral mistakes are more common than mutual mistakes. In the case of a unilateral mistake, the contract may be voidable if the non-mistaken party knew or should have known about the other party's mistake.
In the case of a mutual mistake, the contract is voidable if the mistaken fact is material, i.e., central to the purpose of the contract. For example, a contractor agrees to level a hilltop for the construction of a commercial building. However, after excavation begins, it is discovered that there is bedrock just a foot underneath the soil, making the project much more costly and time-consuming. In this case, the mutual mistake about the composition of the soil would likely allow the contract to be voided.
If you are facing legal issues involving a mistake of fact, it is advisable to hire a contract lawyer. A lawyer can help determine the most appropriate remedy for your claim and guide you on your legal rights and options according to the specific contract laws in your state.
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Frequently asked questions
A mistake in contract law occurs when one or both parties enter into a contract based on a false belief about key facts, terms, or identity. This false belief is also referred to as a mistake of fact.
A mistake of fact occurs when a party enters into a contract without fully understanding or having a mistaken understanding of an important fact that is essential to the contract. Mistake of fact is a valid defence for breach of contract.
A unilateral mistake occurs when only one party is mistaken about the subject matter or terms contained in the contract. A mutual mistake occurs when both parties are mistaken about the same material fact within the contract.
No, the doctrine of mistake cannot be used simply because a party later regrets entering into a contract or finds that the deal is less favourable than anticipated. For a mistake to potentially void a contract, it must relate to a fundamental assumption on which the contract was based and have a material effect on the agreed-upon exchange.
If you discover a mistake after signing, it is important to speak to a lawyer before taking any action. Continuing to perform your obligations under the contract after discovering the mistake could be perceived as acceptance, which may prevent you from challenging it later.
