A contract is an agreement between two in which each agrees to perform a task that results in an exchange of value between them. For example, one party may promise to pay a sum of money to another in exchange for receiving an operable used car from the other party.
A court will enforce a contract that is valid. To be valid, a contract must provide for an exchange of something of value by each party. Common contracts deal with transactions involving the exchange of money, goods, or services. Contracts can be simple, e.g., the purchase of a used car, or complex, e.g., the sale of a company. Valid contracts can be oral or written.
A legal consultation in Texas with a Texas lawyer would help an individual understand the law of contracts and breach of contract in that state. A Texas lawyer could also help with contract drafting and review.
If one party does not perform as promised in a contract, the other party may sue the non-performing party for breach of contract. In order to succeed in a lawsuit for breach of contract, the non-breaching party must prove the following elements of a case for breach of contract.
- There was a valid contract between the parties.
- The non-breaching party performed what they promised in the contract.
- The other party breached the contract by failing to perform as promised.
- The breaching party caused harm to the non-breaching party.
What Constitutes a Mistake of Fact in Texas Contract Law?
Mistake of fact in contract law is a defense to a claim of breach of contract in Texas. There can be unilateral mistakes of material fact when only one party has a mistaken understanding of some fact of relevance to the contract. For example, the breaching party would claim that they had a mistaken understanding of some material fact that was relevant to the contract and that this material mistake was the basis for the non-performance.
A material mistake is simply a mistake that is important or significant as opposed to one that is trivial and unimportant to the purpose of the contract as a whole. A mistake that is only minor or trivial might be the basis of a minor breach of contract, which a court would dismiss as unimportant and not grounds for a successful lawsuit.
An example of a material mistake would be that the party who did not perform their contractual promise did not think delivery of the goods that were sold through the contract was part of the transaction; the non-breaching party would testify to the effect that they believed delivery of the goods was included in the contract price and was an integral part of the deal.
Generally, under Texas law, a contract unilateral mistake, i.e., one that is made by only one party to a contract, would not succeed as a defense to a breach of contract claim. However, according to the doctrine of mutual mistake, when parties to a contract entered into it with a common misconception or common misunderstanding of a material fact, a court would probably void the agreement.
Contract mutual mistakes, if proven, may succeed as a defense to a charge of breach of contract. If the mistake were also known to the other party or if the other party had promoted the mistaken belief of the breaching party, the situation might be different. In the latter case, the unilateral mistake might be a type of fraud in the inducement of the contract that could be used to invalidate it. This could be a successful defense to a claim for breach of contract.
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Are There Any Legal Remedies in Texas For Mistake of Fact In Contract Law?
As noted above, proof of a mutual mistake of fact is a defense to an allegation of breach of contract. So, a party who has been alleged to have breached a contract by failing to perform would claim that the parties both labored under a misconception about a fact of importance to the deal.
If the party alleged to have breached the contract were to successfully prove the existence of this mutual mistake, the court could be expected to void the contract. If there were no contract, then neither party could be liable for breaching of the contract.
Specifically, the elements of the defense of mutual mistake are as follows:
- There was a mistake as to a material feature of the contract.
- The mistake concerned some factual issue that was of such importance to the transaction that it would be grossly unfair to enforce the contract as made.
- The mistake was made in spite of the fact that the parties exercised ordinary care in their dealings regarding the contract and the transaction.
- The parties can be placed back in their status quo position if the contract is rescinded. In other words, rescission would not unfairly prejudice the interests of any of the parties to the contract. The parties would lose the benefit of their bargain, but would not otherwise suffer any harm if the contract were to be rescinded.
A party who is alleged to have breached the contract and claims mutual mistake as a defense must prove each one of these elements in order to succeed.
If a party that breaches a contract does not have a successful defense, they can expect to be liable for some type of damages as follows:
- Liquidated Damages: This would be money damages that the breaching party would have to pay to the non-breaching party. The amount would be determined by a provision in the contract to which the parties agreed when they made their contract or by a court.
- Specific Performance: A court may order the parties to perform as promised in the contract. This is common in contracts concerning real estate transactions.
- Consequential and Incidental Damages: This would be payment of an amount of money that compensates the non-breaching party for the foreseeable losses caused by the breaching party’s failure to perform.
- Compensatory Damages: This would be payment of an amount of money that compensates the non-breaching party for their economic losses.
- Loss of Credit Reputation: If the non-breaching party loses their credit or is forced into bankruptcy by the breach, then they could recover damages for loss of credit reputation.
- Rescission: In rescission, any money paid by one party is returned and the parties essentially cancel the contract and are excused from any future performance.
- Restitution: Each of the parties may return whatever they may have gained already from the transaction before the breach.
Do I Need a Lawyer for Help With Mistakes of Fact in Contract Law?
If you have been sued for breach of contract and think that a mutual mistake about the transaction could be defense for you, you want to talk to a Texas contract lawyer. LegalMatch.com can put you in touch with a lawyer who can review your contract and the facts of your situation and advise you about the best possible defenses available to you.
If you are a party to a contract that has been breached, you, too, want to discuss the situation with a Texas contract lawyer. Your lawyer can consider all of the facts and the contract itself and advise you as to whether you have a case for breach of contract or should pursue a different avenue, e.g., renegotiation of the deal.
Jose Rivera
Managing Editor
Editor
Last Updated: Jun 2, 2025