Mistake in Contract Law: When Errors Affect Agreements
What Is a Mistake in Contract Law?
In contract law, a "mistake" has a specific meaning: it refers to an erroneous belief about a material fact that existed at the time the contract was formed. This is different from simply regretting a deal or miscalculating future outcomes. The mistake must concern a present or past fact, not a future prediction.
Types of Contractual Mistakes
Mutual Mistake
Both parties share the same false assumption about a basic fact. If the mistake materially affects the agreed exchange, the contract may be voidable by either party. The classic example is Sherwood v. Walker (1887), where both buyer and seller believed a cow was barren — it was actually pregnant, dramatically changing its value.
Unilateral Mistake
Only one party is mistaken. Courts are less willing to grant relief for unilateral mistakes unless the other party knew (or should have known) about the mistake, or enforcing the contract would be unconscionable.
Clerical or Scrivener's Error
A typographical or drafting mistake that does not reflect the parties' actual agreement. Courts can reform (correct) the contract to match what the parties intended.
When Mistakes Don't Count
Courts generally will not void a contract for:
- Mistakes about the value or quality of the subject matter when both parties took that risk
- Errors in judgment or business decisions
- Failure to read the contract before signing
- Mistakes about future events (speculation)
Key Remedies
- Rescission — cancelling the contract entirely
- Reformation — correcting the contract to reflect the parties' true intent
When to Consult a Lawyer
Consider seeking legal advice if you discover a significant factual error in your contract that affects its core terms, as time-sensitive options for rescission may apply.
This article is for informational purposes only and does not constitute legal advice. Consult a licensed attorney for guidance specific to your situation.