Unilateral mistake cases occur when one party is misinformed of a contract's specific terms and stipulations. Unilateral mistakes are sometimes voidable in court and can result in legal consequences.

Understanding Legal Mistakes

A mistake in a legal setting is referred to as an error of terms, laws, and facts. Unilateral mistake cases involve just one party that was misinformed as to a specific part of the contract that led to at least one party falsely entering into the agreement.

Unilateral Mistake Cases

There has been a long history of unilateral mistake cases in the legal system. These are just a few of the most recognized ones.

Couterier v. Hastie (1856)

In this particular legal case, one contract party sent the other an inventory of Indian corn then sent an invoice to their employee in London. In the interim, the cargo vessel was sold to another company. The same shipping practices were not followed by the other company, and the corn arrived fermented and spoiled, unable to be sold. The courts later upheld the agreement because at the time of the contract, the plaintiff was not aware that the corn was unsellable.

McRae v. Commonwealth Disposals Commission (1950)

One party sold another party an oil tanker that was said to be in an area known as Jourmand Reef. The plaintiffs later found that not only did the tanker not exist, but there was also no city with the name Jourmand Reef. The plaintiff took the defendant to court to seek damages for the costs incurred. The judge ruled that the contract was void because of a unilateral mistake, eliminating the case for compensation of damages. The case was appealed, however, and damages were later awarded.

Wood v. Scarth (1858)

One party rented a local pub to another party via letter. The terms of the letter stated that the rental amount was £63. The defendant, however, had wrongly assumed that the plaintiff would also pay a premium fee. The contract was invalidated because of this unilateral mistake.

Invalidating a Unilateral Mistake Contract

There are five different categories that can make a contract with a unilateral mistake invalidated.

  • Mutual Mistake: This is a mistaken assumption from both parties as to the specific terms of the contract. The contract can be voided by the party that is harmed by the misinformation.
  • Mistake in Transcription: This is a mistake that started as a verbal agreement. The verbal agreement was then put into writing but did not reflect the initial verbal agreement.
  • Mistake of Misunderstanding: This error occurs when both parties hold different understandings of a meaning or expression. This type of a contract is often not enforceable.
  • Mistake in Transmission: This error occurs when a third-party is used to interpret, draft, or communicate the terms of the contract. If the mistake is unilateral, the contract can often be voided by the misinformed party.
  • Palpable Unilateral Mistake: This error occurs when one party either knew or should have known about the existing contract mistake. It is important to recognize that palpable mistakes are only voided in court if the errors are mechanical and not an error in judgment of quality or value received.

Unilateral Mistakes in Contracts

Unilateral mistakes in contracts are voidable if one party was aware of the mistake because it can lead to uneven contract power. The party with the knowledge of the mistake is likely to have an unfair advantage over the other party. Unilateral mistakes in contracts when one party was knowledgeable can be handled with two methods:

  • Contract Rescission: The entire contract is revoked because of the misinformation.
  • Contract Reformation: The original contract is edited, changing the specific terms that one party was misinformed about.

Avoiding Unilateral Mistake Cases

Avoiding a unilateral mistake can save both parties a lot of time and resources. To make sure both parties are clear on the terms of the contract:

  • Write the contract as clear as possible.
  • Give each party sufficient time to review the contract.
  • Evaluate each parties interpretations of terms and criteria.
  • Use specific descriptions in lieu of vague wording.
  • Use ID numbers instead of product descriptions.
  • Work with a lawyer to draft and review the contract agreement.

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