Unilateral Mistake Example: Everything You Need to Know
A unilateral mistake example could include when one party misunderstands what the terms of a contract are and because of that, leads to a breach of contract. 3 min read
2. Types of Unilateral Mistakes
3. Examples of Unilateral Mistakes
4. Effects of Unilateral Mistakes
5. Avoiding Unilateral Mistakes
A unilateral mistake example could include when one party misunderstands what the terms of a contract are and because of that, leads to a breach of contract. This is in comparison to a bilateral mistake which occurs when both parties are mistaken about components of the contract.
The mistaken error can include different aspects of the contract including specific laws, facts, or term definitions. Entering into a valid contract requires that both parties fully understand the terms and responsibilities of the contract. An example of a unilateral mistake occurs when one of the parties is not in full understanding. Unilateral mistakes tend to be more common than bilateral mistakes when dealing with contracts.
The problem with unilateral mistakes is that they lead to an imbalance of contract power. A contract should be beneficial to both parties in order for it to be valid. When one party does not understand the terms or conditions stated in the contract, they are at a disadvantage. For this reason, a unilateral mistake example could lead to the contract being rescinded or redrafted.
Types of Unilateral Mistakes
There are three types of unilateral mistakes that can occur:
- Mistake of price: One of the most common unilateral mistake examples occurs when one party is not on the same page as the other regarding the price of a specific product or service. This is especially common in international contracts where currency conversions can complicate the process.
- Mistake of fact: This occurs when one party is mistaken as to the specific facts set forth in the contract. A bilateral mistake, also referred to as a mutual or common mistake, occurs when both parties are misinformed about the facts. A mistake of fact can lead to a requirement of a voided contract.
- Mistakes of value: This is often confused with the mistake of facts but is actually very different. This occurs when mistakes are based on the estimation of something or someone's value. The value of a product or service is not fixed and often continually changes.
Examples of Unilateral Mistakes
Unilateral mistakes can arise from any part of the contract. These are some of the most common unilateral mistake examples.
- The definition of a word or phrase: One party mistakenly believes the definition of a word or phrase to be something different than what it actually is.
- The quantity of a product: A mistake as to the specific quantity of a product to be delivered or served.
- The definition of terms or technical phrases: This involves a mistake as to the actual meaning of a specific legal term or technical phrase.
- Words with multiple pronunciations or spellings: This includes words that are pronounced similar or spellings that could easily be mistaken.
- The quality of a product: A mistaken understanding as to the description or quality of the product or service.
Effects of Unilateral Mistakes
Even a single unilateral mistake during the contract drafting process can affect the entire contract. A unilateral mistake is corrected by either editing the specific part of the contract or by voiding the entire contract.
- Reformation of the contract: This is also known as editing the contract, and it is the most common solution to a unilateral mistake example. The contract is edited to reflect the understanding of both parties. Reforming a contract is used when both parties were unaware of the unilateral mistake.
- Rescission of the contract: Sometimes voiding the original contract is necessary. A voided or canceled contract prevents an uneven balance of contract power and from one party taking advantage of the other. Voiding a contract only occurs if the knowledgeable party was aware that the other party was mistaken.
Avoiding Unilateral Mistakes
It is best to avoid unilateral mistakes rather than edit or void them after the fact. Unilateral mistakes can be avoided with the following tips:
- The contract should be written as clearly as possible.
- Both parties should review the contract in full.
- Both parties should check the other party's interpretation.
- The contract should avoid vague and unclear words and phrases.
- When possible, the contract should use ID numbers rather than general descriptions.
- The contract should only be signed after a clear understanding is established.
- Work with a lawyer on drafting and reviewing the contract to clear up any misunderstandings.
Following these steps during the contract creation process can prevent unilateral mistake examples and can save both parties a significant amount of time and financial resources.
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