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 What Is a Contract? What Is a Contract Mistake?

A contract is an agreement between two or more parties that creates legally binding obligations to each other. Contracts are enforceable in a court of law. A contract can be either oral or written; however, oral contracts are more challenging to enforce because the contract’s exact terms may vary depending on who is telling the story.

Some contracts must be written to be enforceable: contracts involving more than $500, real estate, or a marriage arrangement are three examples of contracts that absolutely must be in writing to be enforceable.

To be considered valid and legally binding, a contract must include the following:

  • An offer
  • An acceptance of that offer
  • One or more promises to perform some act or refrain from some act
  • A valuable consideration
  • Terms and conditions for the performance
  • The actual performance

The Statute of Frauds governs most contracts and determines which contracts must be made in writing to be legally enforceable. Some states 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 know local laws when drafting or entering a contract.

Contract mistakes typically occur when two or more parties do not clearly understand the contract’s term, definition, word, or phrase. 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:

  • Errors in the description of an item
  • Mistakes involving quantity, delivery dates, sales prices, and other such specific details
  • Errors involving the rights and duties of any party involved in the contract

Contract mistakes may also be referred to as contract errors. This is when a contract includes information that is objectively wrong or false. Any errors or mistakes in a contract could potentially lead to a lawsuit to clarify the meaning of the disputed term.

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 is confused or in error. In other words, the other party(or parties) does not share the error. Thus, a unilateral mistake occurs when only one party is mistaken about the subject matter or the terms contained within the contract. A unilateral mistake is more common than other types of contract mistakes.

Unilateral mistakes can occur regarding 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 regarding prices, quantities, dates, and the description of goods and services. It is important to note that some courts may not allow an individual who unilaterally mistook the contract terms to be granted 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 two parties are aware of a mistake and disagree regarding the true meaning of the disputed contract term. One defense to a lawsuit based on mutual mistake would state that both parties to the contract relied on the same mistaken assumption when entering the contract. This would then render the contract null and void since there never was a meeting of the minds regarding the agreement’s terms and each party’s rights and responsibilities. A mistaken assumption is a fact that both parties believed to be true at the time of the contract’s signing. 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 promised.

How Are Contract Mistakes Remedied in the Law?

A breach of contract claim can be brought when a party to a valid contract has failed to fulfill their side of the agreement. Contracts can be breached in various ways, like failing to fulfill obligations outlined in the contract or doing something the contract prohibits. What legal remedies may be available in a case involving a contract mistake will depend upon each case’s specifics.

Contract disputes are civil lawsuits, not criminal ones. Typically, mistakes will be remedied through payment of monetary damages. The amount will depend on how much money it will take to put the parties back into their position before the contract is entered into.

Other forms of damages, commonly referred to as “consequential damages,” “special damages,” or “expectation damages,” are specific types of damage that arise as a result of a breach of contract by one party. Consequential damages are damages above and beyond money lost because of the breach of contract.

They are damages that a breaching party should have expected when they breached the contract, and it would not surprise them that if they breached the contract, the other party would suffer this form of harm. While direct monetary damages focus on the costs associated directly with the contract, consequential damages focus on the costs outside the contract.

Examples generally include:

  • Lost profits
  • Lost products
  • Lost time
  • Damage to reputation
  • Reduction in the value of a product

Another form of remedy is “rescission.” This is where the contract is completely canceled, and the parties are restored to their positions before the contract is entered into. This remedy is generally only available if the non-mistaken party knows or should have known about the unilateral mistake.

There is another type of damage called “reformation.” In this case, the written agreement is changed to reflect the understanding originally held by both parties. Reformation may only be granted if one party was unaware that the writing did not conform to the 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.

Last, there are “punitive damages.” Punitive damages are monetary damages granted to the non-breaching party above and beyond their actual damages. The court might award these damages in cases where the offending party has committed acts that are so reckless and malicious they give a reasonable person pause. Also called exemplary damages, punitive damages are granted to punish the guilty party for outrageous misconduct.

Do I Need an Attorney for Contract Mistakes?

A skilled and knowledgeable contract attorney in your area can assist you in all stages of the contract process. An experienced attorney can help draft and edit a contract, and ensure that all terms are clarified before the contract is signed. If you have any questions or inquiries, your attorney can explain these to you clearly.

Additionally, an attorney can file a lawsuit on your behalf if a contract mistake is made. They can represent you in court as needed. It is important to note that filing a lawsuit for contract mistakes involves considering various aspects of the agreement and state and federal contract laws. An experienced contact attorney can help you navigate complex contact interpretation laws and obtain your best legal remedy.

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