We here at FindLaw like making the point that the law of contracts touches upon almost every aspect of the legal system. Furthermore, we’ve covered how to create a valid contract, as well as the capacity of a person to enter into a contractually binding relationship. So that would be all areas of contract law covered, right? Well, no, because contract law is extensive to begin with, and also, we haven’t addressed a situation where there has been a mistake in regards to the contract, and what actions can be taken in such a scenario? Questions may arise that revolve around the validity of the document, and if it could be made void? Mistakes when producing a contract do sometimes occur, and the options available are dependent on the type of mistake made. This piece will strive to cover the most common types of mistakes that happen in the law of contract, as well as the potential consequences.
The general rule of mistake in a contract
One of the important conventions when creating a contractual relationship, is that there must be consent by all parties to be bound by the agreement for it to be valid. The courts when considering a contract is valid will generally assume that an agreement has been reached if all parties are in agreement to the, er, agreement.
In the event when a mistake does occur in a contract, one of the options that may be taken, is to make the whole transaction null and void from the very beginning. Although, it should be pointed out, that making a contract null and void when a mistake happens is just one of the options that can be taken.
The only situation where a contract can be rendered as void is when there has been a mistake of fact.
Common mistake in a contract
The approach of the courts is that contracts are only really avoided if there has been a common mistake, and which is in direct reference to the subject matter in which the agreement is based. If a contract is made that has an accidental quality in regards to the subject matter, the courts are less inclined to make the contract void.
Unilateral mistake in a contract
There are multiple examples of when a unilateral mistake can be made in a contract.
Firstly, in a situation where one party to the contract is aware of a mistake, or should have been reasonably aware, and takes no action to correct the mistake, it is then up to the party claiming the mistake in identity to rebut the presumption. If a unilateral mistake has been made and proven by the complainant, the contract may be made void from the very beginning of the creation of the contractual relationship. Furthermore, a contract can also be void if there is a mistake in the terms of the contract and which is known to the other party to the relationship.
Secondly, mistakes can still be made when a contract is agreed upon when all parties are present in the same place and at the same time. There is a general presumption that when the contract is concluded in person, it is directed to the specific party that is in the same place. However, case law has suggested that when a relationship is created where the identity of the person is fundamental to the contract matter, the document can be void if the identifiable party in which the contract was directed towards, is in fact a party who has fraudulently put forward another identity to induce a person to enter into a contract.
On the other hand, if there is no issue in regards to the intention of all parties to deal with one another, then the contract can only generally be treated as voidable, rather than void.
Contractual mistake made in writing
Anyone who has signed a contract but then has realised that the contract did not correlate with what they presumed the agreement was based upon, that person can argue that the contract is void if they are able to show:
• the contract was fundamentally or radically different from what they assumed the document to be
• the contract was signed due to the person suffering from a disability, or was induced by fraud in order for the person to sign the agreement.
Contract law can be an area of law that causes great difficulty. If you have any contractual issues that need to be resolved, always seek the appropriate legal advice.