3 Common Mistakes in Contract Law & How to Prevent Them

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Have you ever wondered what is a mistake in contract law and what does it imply? A mistake in contract law is an erroneous meaning of words or facts. It can be argued as a justification, and if warranted that is what makes a contract void. Alternatively, the court can provide an equitable remedy to a contract found voidable.

There are three common mistakes in contract law namely unilateral, mutual, and common mistakes.

Unilateral mistakes

Unilateral mistake befalls when one party to an agreement is misguided as to the terms contained in an agreement. Unilateral mistakes occur often than any other mistake. When looking at unilateral mistakes, you must first note the difference between business error
and mechanical calculations.

An agreement might be rescindable from a unilateral mistake for any of these reasons:
• Clerical fault that did not lead to gross negligence
• If the error was so serious and irrational to be outrageous
• If one party to the contract relied on a material fact that the other party knew was mistaken

Note that in a unilateral mistake only one party is misguided as to the terms of a business sale contract while the other is not. A unilateral mistake can lead to an unfair advantage when it comes to bargaining power. That is because only one party is mistaken. Some of the remedies to a contract entered into on the basis of a unilateral mistake include contract reformation and contract rescission.

The best way to avoid a unilateral mistake is to work with an attorney before negotiating terms of a contract so that your attorney can help you draft and review the contract. Once you discover a unilateral mistake in your agreement, contact an attorney to represent you in court to ensure you obtain proper relief.

Mutual mistake

It occurs when both parties to an agreement are misguided about the same material fact within the terms of their agreement. That way both parties are at cross-purposes. Even though both parties are mistaken, they are in consent, so the business sale contract is voidable. There must be a material fact for a mutual mistake to be void.

Ruffles vs Wichelhaus

A good example that illustrates what is a mistake in contract law is the case of Ruffles vs. Wichelhaus. There was a contract to ship merchandise on a vessel named Peerless. However, the parties involved had a different understanding of each other. Each party was referring to a different vessel, and therefore, they did not agree when to ship the merchandise. In this case, both parties thought they were in consent until they realized were both misguided about each other’s different meaning. As such, an agreement was not formed since there was no mutual assent between the parties involved in the formation stage of the agreement. Like a unilateral mistake, the best practice to avoid a mutual mistake is to consult an experienced attorney to determine whether a defence of mutual mistake is a viable option for you.

Common mistake

A common mistake occurs if both parties hold a similar misguided belief of fact. What makes a contract void is sufficient evidence to show that the mistake is satisfactorily fundamental to render its identity different from the terms of the contract. With so much time and resources spent in entering into a contract, every manager needs to ensure that the contract is in the best interest of the company. Having a basic understanding of the art of drafting agreements can prevent a manager from entering into a misguided contract.

ABOUT THE AUTHOR: Carter Capner Law
Carter Capner Law is a personal injury law firm in Brisbane & Gold Coast that has delivered outstanding legal results for over 70 years.

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Disclaimer: While every effort has been made to ensure the accuracy of this publication, it is not intended to provide legal advice as individual situations will differ and should be discussed with an expert and/or lawyer. For specific technical or legal advice on the information provided and related topics, please contact the author.

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