Understanding Contractual Mistakes

Robyn Shepherd | SchoemanLaw Inc  

Category: Contract Law | Contract 

Introduction 

In the realm of contractual law, instances of mistake or error can introduce complexities by causing dissension between contracting parties. This article delves into the nuances of contractual mistakes, their categorizations, and the legal considerations associated with them. 

Types of Mistakes 

Unilateral Mistake 

Unilateral mistake occurs when one party is mistaken, and the other party is aware of the error. This situation introduces an asymmetry of information between the contracting parties. 

Mutual Mistake 

The mutual mistake arises when both parties are mistaken about each other's intentions, leading to a divergence in their understanding of the contract's terms. 

Common Mistake 

Unlike unilateral or mutual mistakes resulting in dissensus, a common mistake, while not causing disagreement, renders the contract void based on an incorrect underlying assumption. 

Materiality of Mistakes 

The materiality of a mistake hinges on its influence on a party's decision to enter into a contract. Material mistakes are further classified into: 

Material Mistake: A mistake that vitiates or negates actual consensus between parties, relating to or excluding an element of consensus. Non-material Mistake: A mistake that does not affect the actual agreement between parties, as it does not pertain to an element of consensus. 

Mistakes have historically been categorized based on their types: 

Error in Corpore: Mistake concerning the contract's subject matter or object of performance, deemed material. Error in Negotio: Mistake regarding the nature of the contract, considered material. Error in Persona: Mistake about the identity of the other party, deemed material only if crucial to the mistaken party. Error in Substantia: Mistake regarding an attribute or characteristic of the contract's subject matter, generally not considered material. Mistake as to Motive: Not considered material. Error Iuris: Mistake of law, not considered material if it relates to motive. 

To avoid undue hardship and maintain the reliability of contractual commitments, the courts have balanced subjective and objective bases of contracts through doctrines such as estoppel, quasi-mutual assent, and the iustus error approach. 

Estoppel: A party relying on a misrepresentation may hold the other party to the misrepresented facts, upholding a fictional contract. 

Reliance Theory: Requires a reasonable belief induced by the other party, giving rise to an actual contract. 

Declaration Theory: Grounds contractual liability purely on objective declarations of will, irrespective of inner will or actual intention. 

Iustus Error Approach: Places the onus on the contract denier to prove that their mistake is both material and reasonable. 

Conclusion 

Understanding the intricacies of contractual mistakes is essential in navigating legal challenges. Whether unilateral, mutual, or common, the classification and materiality of mistakes play a pivotal role in determining contractual outcomes. The harmonization of subjective and objective approaches further ensures a balanced and fair resolution of disputes arising from contractual mistakes. 

Consult an Attorney by contacting SchoemanLaw Inc today! 

Robyn Shepherd | SchoemanLaw Inc 

Attorney  

https://schoemanlaw.co.za/our-services/contract-law/