Mistake in Contract


Mistake of law and mistake of fact are two types of defense by excuse, via which a defendant may argue that they should not be held criminally liable for breaking the law or liable for damages under a civil law action.

Most criminal courts do not recognize mistake of law, in which the defendant argues that they never knew of the law and thus should not be held liable. This defense is often countered with the clichéd maxim: "Ignorance of the law is no excuse."

Mistake of fact is sometimes seen as valid. For example, if one were to go to an airport and pick up a bag which looked like one's own, and that bag were to contain a bomb, one might argue that a mistake had led to possession of the bomb. Another common example is taking another person's coat from a coatrack when you intended to take your own. This can also be interpreted as the lack of a mens rea. For a leading Supreme Court of Canada case on the mistaken belief defence see: R. v. Park.

Mistake in Contract

In the civil law mistake may be used as a means to invalidate a contract. There are three different types of mistake in contract: unilateral mistake, mutual mistake, and common mistake.

Unilateral mistake

A unilateral mistake is where only one party to a contract is mistaken as to the terms or subject-matter. The courts will uphold such a contract unless it was determined that the non-mistaken party was aware of the mistake and tried to take advantage of the mistake.

The leading case on unilateral mistake is Smith v. Hughes (1871).

Mutual mistake

A mutual mistake is when both parties of a contract are mistaken as to the terms. Each believe they are contracting to something different. The court usually tries to uphold such a mistake if a reasonable interpretation of the terms can be found.

The famous case of the Peerless ship is an example in the case of Raffles v. Wichelhaus. The defendant had made an order for the purchase of cotton for goods arriving on a certain boat Peerless from Bombay leaving in October. However a different boat arrived called Peerless , also from Bombay, but having left in December. The plaintiff merchant sought to enforce the contract for the sale of cotton, but the defendant refused stating that it was not the cotton that he had ordered. The court stated that reasonable meaning must be found. However, on the facts, there was no single reasonable interpretation of the terms, both parties were equally mistaken, thus the contract was void.

Common mistake

A common mistake is where both parties hold the same mistaken belief of the facts.

The House of Lords case of Bell v. Lever Brothers Ltd. established that common mistake can only void a contract if the mistake of the subject-matter was sufficiently fundamental to render its identity different from what was contracted, making the performance of the contract impossible.

Later in Solle v. Butcher, Lord Denning added requirements for common mistake in equity, which loosened the requirements to show common mistake. However, since then the case has been heavily criticized in cases such as Great Peace.

Wikipedia article (the free online encyclopedia) reproduced under the terms of the GNU (General Public License) Free Documentation License.

Rated #1 US News & World Report

"Lawyer of the Year Award...Through your outstanding leadership and advocacy, you have provided the voice of justice in protecting the basic human rights of your clients." Governor of California


Nationwide Litigation & International Arbitration