TYPES OF MISTAKES IN CONTRACTS AND HOW TO AVOID THEM

There are various types of mistakes in contracts one may make and they can render the contract void or voidable depending on the parties.

Types of mistakes in contracts can be classified into three categories which are: common mistakes, mutual mistakes, unilateral mistakes all of which we intend to look at.

What are mistakes in contracts

A mistake is an error in belief concerning certain aspects. A mistake will become a vitiating factor in a contract just like misrepresentation, duress, undue influence and illegality, all of which can destroy the validity of a contract.

In commercial contracting, mistakes could be mistakes of law or mistakes of facts. Mistakes of the law can never be relied on as a legal defense and as such we will choose to ignore them in this article.

Mistakes of facts are also referred to as operative mistakes and at common law they will render the contract void ab initio (from the beginning), i.e, once proved the parties will be brought back to their initial position as though the contract never existed.

3 Types of mistakes in contract

The general approach is to divide mistakes into three categories;

• common mistakes
• mutual mistakes
• unilateral

Let’s look at these one by one

COMMON MISTAKE

This type of mistake occurs when both parties assume one thing yet the reality is different.

Here is how that works practically

Let say you decide to sell your laptop and you tell a friend that if they are aware of anyone who would be interested in buying the laptop, they should let you know or actually they can go ahead and conduct the transaction on your behalf.

On this particular day you meet a potential client and it just so happen that your phone is off and on the other end of the town your friend has also met a client and since they were in possession of the laptop they go ahead and sell it. This mean your client cannot get the laptop and that if you had a contract with them you go into it as a result of a common mistake, assuming the laptop was in market and yet it had already been sold.

The effect of common mistake in the example given is that it will render the contract void

Couturier V. Hastie (1853),

A buyer bought a cargo of corn which both he and the seller believed was at sea. The cargo had, however, already been disposed of by the ship master. It was held that the contract was void

MUTUAL MISTAKE

You end up with this kind of mistake in a situation where the parties are both under an error, but the error differs in the sense that neither is aware of the other’s error.

Here is a practical example

Let’s say John is interested in buying a car from Jane who has two cars and has let it known to John that she intends to sell one. Let’s assume that the cars are a BMW and a Mercedes Benz.

Assuming the definition of the car being sold is poorly done, to the effect that during the negotiation and eventual delivery of payment John believed that he is buying the BMW BUT Jane is actually selling the Mercedes Benz, then both parties have made a mistake. Mutual mistake to be specific.

The effect of this in a contract is that it will make the contract voidable. Meaning that if the parties are willing to change the car, then the contract can still be executed otherwise it will not.

UNILATERAL MISTAKES

In this case one of the parties is mistaken.

How does that happen?

Think of fraud cases where one party knows the truth while the other does not. So, if the party who isn’t aware of the on-going fraud or con get into a contract with the other party, the innocent party is actually making a mistake and the other party is aware of it.

The problem with unilateral mistakes is that the mistake could actually be legally binding depending on the nature of the contract unless the other party can prove otherwise

CONCLUSION

You always have to be careful when getting in contracts.

Generally, a person is bound by the documents to which he has appended his signature whether he has read them or not. The party may plea non est factum (it is not my deed) the effect would be to relieve the party of the liability under the document in question, if they succeed.