Unilateral Mistake (Contracts Law: All You Need To Know)

What is a unilateral mistake in contract law?

What are some examples of unilateral mistakes?

What are the important elements you should know!

Keep reading as we have gathered exactly the information that you need!

Let’s dig into our contract law basics!

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Understanding unilateral mistake

What is a unilateral mistake in the context of contracts?

To understand the basic meaning of a unilateral mistake, let’s first address the meaning of mistake.

Essentially, a “mistake” is an error made by a contracting party on:

  • The meaning of certain terms in the contract
  • Mistake of fact 
  • Mistake of law

A contract signed on the basis of a unilateral mistake is one that the contracting party did not fully appreciate, understand its legal ramifications or scope of obligations.

Now that we have the term mistake covered, let’s look at the term “unilateral”.

A “unilateral” mistake is a mistake that is committed on the part of one contracting party.

For a unilateral mistake to take place, one of the contracting parties did not adequately interpret the terms of the contract or failed to properly understand its legal responsibilities in entering into the contract.

In contract law, parties should enter into a contract on the basis of information fairly exchanged and in good faith.

If a unilateral mistake was induced by one party giving it an unfair advantage while leading the other party to act to its detriment, various legal options and remedies may be available to the mistaken party to deal with such a situation.

Unilateral mistakes typically occur on the following aspects of a contract:

  • Price 
  • Quantities
  • Delivery dates
  • Description of the goods
  • Scope of services 

Unilateral mistake definition

How do you define unilateral mistake?

A unilateral mistake is a type of mistake relating to different aspects of a contract such as mistakes of fact or mistakes of law.

For a contract to be valid and enforceable in most jurisdictions, it must be mutually agreed and understood by the parties.

When a party is aware that another party is making a mistake of fact or law and does not do anything to rectify the facts or clarify the misunderstanding to unduly take advantage of the other, the contract may be voided.

Types of unilateral mistakes

What are the different types of unilateral mistakes a party can make when entering into a contract?

There are essentially several types of mistakes.

Let’s go over them quickly.

A unilateral mistake of fact is when a person makes a mistake relating to a factual aspect of the contract such as price, quantities, volume, metrics, technical specifications, location of delivery and so on.

A unilateral mistake of fact can be a mistake about the identity of the contracting party.

A unilateral mistake of law is a type of mistake that relates to a party’s legal obligations, the type of contract that is being signed or applicable law, etc.

You can also have a material mistake or a collateral mistake when contracting.

A material mistake is a mistake affecting the essential elements or consideration of the contract.

Typically, mistakes relating to the material elements of a contract may lead to litigation and dispute between the parties as there was a mistake on the main reason why one party contracted in the first place.

If the mistake is not material, it may be collateral.

A collateral mistake is a type of mistake that is important but does not affect the main purpose or object of the contract.

This type of mistake may not lead to the right of rescission but can lead to remedies such as a reduction in price or legal obligations.

Preventing unilateral mistakes

One of the most effective ways to prevent unilateral mistakes from happening is to ensure that your contract is drafted in clear and simple terms.

During the negotiation process, many terms and conditions may change.

From time to time, it’s important to take a step back and read the contract from an overall perspective to ensure that the terms and conditions meet your overall objective.

Too much legal jargons, too many technicalities, and vague or ambiguous terms contribute to contractual unilateral mistakes.

If the contract must be technical by its very nature, it’s a good idea to have an experienced attorney or lawyer guide you through the process so you know what you are getting into.

Here are some tips on how to avoid unilateral mistakes:

  • Make sure you read the entire contract
  • Make sure that the terms used in the contract are clearly defined
  • Have any ambiguous or vague terms defined
  • Sign the contract once you’ve had the chance to look at it with a lawyer

Legal remedies 

What happens when a party causes another contracting party to err or mistake when contracting?

What are the legal effects of a unilateral mistake?

In most jurisdictions, contract laws are designed to allow parties to enter into a contract fairly and voluntarily.

In other words, when parties enter into a contract on the basis of true and complete information, they are legally bound by the contract and the resulting legal obligations.

However, if a party did not enter into a contract on the basis of true and complete information, then the aggrieved party can seek remedies in law such as contract rescission or contract reformation.

Contract rescission is a legal remedy allowing a party to demand the complete cancellation of the contract as if the contract never existed in the first place.

If granted, the courts will order the contracting parties to be restored to their position prior to entering the contract (the parties must return whatever they received).

Contract reformation is a type of remedy where the contract is modified or terms are changed to reflect what the parties intended the contract to say.

This type of remedy is generally applied when there is a mutual mistake by the parties.

No matter the type of remedy you are getting, if the non-mistaking party was in good faith or did not know that the other party was mistaking, the courts may evaluate that in their decision.

Generally, if the non-mistaking party was “aware” that the other party was being misled or mistaking on a material aspect of the contract and does not do anything about it, the courts may be more favorable to offering a legal remedy to the aggrieved party. 

Unilateral mistake example

A unilateral mistake can potentially affect any type of contract or any of its terms.

You can have a unilateral mistake in a contract for services, sale of goods, real estate contract, or any other type of contract.

For example, if a person is entering into a real estate transaction and believes they are buying a piece of residentially zoned land while the zoning laws do not allow any type of residential construction, that’s a unilateral mistake.

Another example is when a person purchases a complex software system believing that the implementation is included while the purchase price did not, that’s a mistake on the scope of the contract.

Very often, you may find a contracting party make a unilateral mistake in:

  • Properly evaluating the number of goods being purchased
  • The scope of services being rendered
  • Important metrics relating to volume, quantity or measurement
  • Misunderstanding of technical aspects of the contract
  • Misunderstanding of actual terms of the contract
  • Mistakes or errors in regards to the quality of the goods or services being purchased 

Takeaways 

So, what is a unilateral mistake? 

Let’s look at a summary of our findings.

Unilateral mistake:

  • A “unilateral” mistake is when one party to a contract makes a mistake
  • A “mistake” is when a party does not fully understand the factual or legal basis of the contract
  • Factual mistakes can relate to price, value, quantities, location, metrics, specifications, delivery, party identity or any other factual element of the contract
  • Legal mistakes are when there is an incorrect understanding of the legal nature of the contract or the legal obligations 
Bilateral mistake
Breach of contract 
Business law 
Clean hands doctrine
Contract interpretation
Contract law 
Contract termination letter
Duty to mitigate damages
Fraudulent misrepresentation cases 
Mutual agreement
Mutual assent
Mutual mistakes 
Remedies for breach of contract
Unilateral contract
Unilateral vs bilateral
Unjust enrichment
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