The term “contract” refers to an agreement, generally documented, between two private parties that creates mutual legal obligations. Contracts can be either written or oral, although oral contracts are usually more difficult to enforce and may not even be legally binding in some cases. Contracts involving amounts of more than $500 or a marriage arrangement are two examples of contracts that absolutely must be in writing in order to be considered valid and legally binding.
In order to be considered valid and legally binding, a contract must include the following:
- An offer;
- An acceptance of that offer;
- A promise to perform;
- A valuable consideration;
- A time or event in which the performance must be made;
- Terms and conditions for the performance; and
- The actual performance being made.
The Statute of Frauds governs most contracts and determines which contracts must be made in writing in order to be legally enforceable. Some states will have their own laws and statutes governing contracts, in addition to or in place of the Statute of Frauds. As such, it is important to be aware of local laws when drafting or entering into a contract.
Contract mistakes typically occur when a term, definition, word, or phrase is not clearly understood in the contract. A common example of this would be when a key term or phrase has more than one reasonable meaning. Some specific examples of such misunderstandings include but are not limited to:
- Mistakes involving the quantity of an item being sold;
- Errors in the description of an item;
- Mistakes involving delivery dates, sales prices, and other such specific details; and
- Errors involving the rights and duties of either party involved in the contract.
Contract mistakes may also be referred to as contract errors, or when a contract includes information that is objectively wrong or false. Any errors or mistakes in a contract could potentially lead to a lawsuit in order to have the meaning of the disputed term clarified. Mistakes may be either unilateral or mutual.
What Are the Most Common Types of Contract Mistakes?
The two most common types of contract mistakes are unilateral and mutual mistakes. A unilateral contract mistake occurs when only one party holds the error. In other words, the error is not shared by the other party. Thus, a unilateral mistake occurs when only one party is mistaken as to the subject matter, or the terms contained within the contract.
A unilateral mistake is more common than other types of contract mistakes. If a contract was entered into on the basis of a unilateral mistake, it could lead to an unfair advantage in bargaining power and would need to be remedied.
Unilateral mistakes can occur in regards to any of the terms and provisions contained within the contract. Most commonly, unilateral mistakes occur when the definition of a word or phrase is unclear. They also occur frequently in regards to prices, quantities, dates, and the description of goods and services. It is important to note that some courts may not allow an individual that is unilaterally mistaken to the terms of a contract to be granted any legal relief. This means that often courts will still hold an individual liable for their obligations under the contract, regardless of the unilateral mistake.
Mutual mistakes occur when both parties are aware of the mistake, and are also in disagreement regarding the true meaning of the disputed contract term. A mutual mistake defense would state that both parties to the contract relied on a mistaken assumption when entering the contract which would then render the contract void. A mistaken assumption is a fact that both parties believed to be true at the time of the contract’s signing. However, due to some change in circumstances, that fact is no longer true and as a result, one party can no longer perform the contract as they originally intended.
How Are Contract Mistakes Legally Remedied?
What legal remedies may be available in a case involving a contract mistake will be dependent upon the specifics of each case. In most cases, contract mistakes will be resolved in one of the following two ways:
- Rescission: This is where the contract is completely canceled, and the parties are restored to their positions prior to the contract being entered into. This remedy is generally only available if the non mistaken party knows or should have known about the unilateral mistake; or
- Reformation: Contract reformation occurs when the written agreement is changed to reflect the understanding originally held by both parties. Reformation may only be granted if one party was not aware that the writing did not conform to the actual agreement.
The choice between rescission and reformation generally depends on the type of contract mistake involved. Rescission for mutual mistakes requires that the mistake is a basic, foundational part of the contract agreement. In cases of unilateral mistakes, some courts require that the non mistaken party knew about the mistake and took advantage of the mistaken party’s belief. Reformation is usually granted in cases involving either mutual or unilateral mistakes.
Do I Need an Attorney for Contract Mistakes?
A skilled and knowledgeable contract attorney can assist in all stages of the contract process. An experienced attorney can help draft and edit a contract, as well as ensure that all terms are legal and clarified before the contract is signed.
Additionally, in the event that a contract mistake is made, the attorney can file a lawsuit on their client’s behalf. Further, they can represent their client in court as needed. It is important to note that filing a lawsuit for contract mistakes involves considering various aspects of the agreement, as well as state and federal contract laws. An experienced contact attorney will be able to help you navigate the complex contact interpretation laws and obtain your best legal remedy.