A bilateral mistake example includes instances when both parties to a contract are mistaken or misinformed as to the specific terms. Bilateral mistakes, in comparison to unilateral mistakes, involve both parties of the contract. A unilateral mistake involves just one party to the contract acting under false misconceptions.

What Is a Bilateral Contract?

Contracts are used in both business and personal situations. The concepts of bilateral and unilateral are actually common in an everyday setting and knowing the difference between the two can assist with legal and personal relationships. 

Most contracts are considered bilateral, meaning that the agreement includes at least two parties. The majority of contracts include bilateral agreements. Everyday examples of bilateral agreements include:

  • Completing a transaction at the store
  • Purchasing a meal at your favorite restaurant
  • Receiving medical services from your physician
  • Paying your phone bill each month

In each of these situations, you are completing an action in return for another action. In most cases, the agreement involves payment in the form of money in return for a product or service. However, this is not always the case with bilateral agreements.

In order to take a bilateral agreement to court, you must provide the following components:

  • Proof that the contract ever existed
  • Proof the contract or terms were broken
  • Evidence that you suffered a loss
  • Evidence that the other party is responsible for the loss

Bilateral Mistake Errors

A bilateral mistake is defined as an error that involves both parties of the contract having an understanding that is not what the contract terms actually state.

There are two types of possible contract mistakes including a mistake of law and a mistake of fact.

Mistake of Law

A bilateral mistake of law occurs when both parties are misinformed about the contract terms. There are two types of mistakes of law that can occur:

  • Mistake of home law: A bilateral mistake of home law occurs when both parties are not aware of the home laws in which they operate in. Mistake of home laws is not excusable by law because it is expected that a person doing business in their home state should be aware of the laws there.
  • Mistake of foreign law: A bilateral mistake of foreign law occurs when both parties are misinformed as to the specific laws of a state that they are not residents of. This is common when doing business across state or country borders. This type of mistake is more likely to be void because a person cannot know all of the laws outside of their own home state.

Mistake of Fact

A bilateral mistake of fact occurs when both parties are misinformed as to the facts or terms laid out in the contract. There are two types of mistakes of facts that can occur:

  • Bilateral mistake: Both parties are misinformed as to the contracts meaning and terms. Bilateral mistakes are also sometimes referred to as mutual or common mistakes. Bilateral mistakes can involve the contracts terms or the ability to perform them. Bilateral mistakes are often voidable in court.
  • Unilateral mistake: A unilateral mistake means that just one party is misinformed as to the terms or meaning of the contract. It can be much harder to void a contract that is based on a unilateral mistake.

Types of Bilateral Mistakes

Bilateral mistakes can include two different types of mistakes:

  • Subject matter mistakes: Both parties are misinformed about the overall subject matter of the contract. This often leads to a void of the contract. Subject matter mistakes can include title, quantity, quality, price, and identity mistakes.
  • Possibility of performance mistakes: Both parties are mistaken as to the ability of performance capability. This will usually lead to a voided contract since it is impossible for at least one party to complete the terms of the contract. Impossibility of performance can be due to either physical or legal reasons.

Bilateral Mistake Examples

There are many different types of contracts that can involve bilateral mistakes. A bilateral mistake can occur when one party becomes unexpectedly ill, when an expected product inventory does not make it to its intended location, or when parties are misinformed as to legal ownership of a property or item.

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