Micro-table: key mistake types
Disclaimer: This is general information for a business audience, not legal advice. Contract doctrines vary by jurisdiction (U.S. Restatement, English law, civil-law systems, UNIDROIT). Always check the law where you operate and consult counsel.
Contract law is the body of rules that decides when a promise between two or more parties becomes legally enforceable, what the terms mean, and what remedies are available if someone does not perform. It lets businesses price and allocate risk, enforce payment and delivery, terminate or renegotiate without breaching, and standardize terms across sales, procurement, SaaS, NDAs, and employment.
Elements of a valid contract
Offer – Would a reasonable person think a definite commitment was made (price, subject matter, parties, timing)?
Acceptance – Did the offeree unconditionally agree to the terms communicated?
Consideration – Did both sides exchange something of value or a bargained-for detriment?
Capacity – Was each party legally capable of contracting?
Legality / intent to create legal relations – Is the object lawful and was there an intention to be bound?
Mistake of fact: parties are wrong about an existing fact at the time of contracting.
Mistake of law: parties misunderstand the legal effect of the contract or write it wrongly.
Common / mutual mistake: both sides share the same wrong assumption.
Unilateral mistake: only one side is mistaken.
Key test: Was there a wrong assumption about a basic fact/law, did it materially affect the exchange, and did the mistaken party assume the risk?
Restatement (Second) §152(1) (paraphrased): A contract is voidable by the adversely affected party when both parties were mistaken about a basic assumption on which the contract was made, the mistake has a material effect on the agreed exchange, and the party seeking relief did not bear the risk of the mistake.
English law is stricter on common mistake. Bell v Lever Bros (1932, HL) and Great Peace (2002, CA) show that common mistake will void a contract only where the non-existence of the assumed state of affairs makes performance impossible or fundamentally different, and the contract did not allocate the risk.
Restatement (Second) §153 allows relief for unilateral mistake where the mistake is basic and material, and the other party had reason to know of it or enforcement would be unconscionable. Courts are reluctant to unwind deals for one-sided errors unless the other side tried to take advantage.
Raffles v Wichelhaus (1864) held there was no contract where each party reasonably had a different ship in mind (“Peerless”). Not every misunderstanding is a mistake; some are latent ambiguities, in which case no contract is formed.
Rescission unwinds the contract when the mistake is fundamental. Reformation or rectification rewrites the document to match the actual agreement where there is a mistake in expression. Integration clauses, parol-evidence rules, and assumption-of-risk clauses can limit or defeat mistake claims.
Table: mistake types → effect → typical remedy → key authority
Name the subject precisely (model number, vessel, lot, delivery window).
Add an assumption-of-risk clause for key uncertainties.
Document pre-contract facts (inspection reports, certificates).
Use integration / entire-agreement clauses.
Require written change orders.
Run two-person review on numbers and dates.
Attach specs/SOWs.
State governing law / jurisdiction.
Train teams to spot ambiguity.
Keep negotiation trails (emails, term sheets).
Formation to enforcement (statute of frauds; parol evidence)
Statute of frauds: certain contracts must be in writing and signed (land, 1+ year, suretyship, and under UCC, goods $500+). Parol evidence rule: prior or contemporaneous statements cannot contradict a final written agreement, with exceptions for ambiguity, fraud, and mutual mistake.
Formation to enforcement (statute of frauds; parol evidence)
Statute of frauds: certain contracts must be in writing and signed (land, 1+ year, suretyship, and under UCC, goods $500+). Parol evidence rule: prior or contemporaneous statements cannot contradict a final written agreement, with exceptions for ambiguity, fraud, and mutual mistake.
The UCC in a nutshell (goods)
UCC §2-201 requires a writing for sales of goods $500 or more. UCC §2-202 allows final writings to be explained or supplemented by course of performance, course of dealing, and usage of trade. UCC §2-209 allows modification without consideration if made in good faith.
Benefits (predictability, risk control, speed)
Predictability: you know when you can terminate and what remedies apply.
Risk control: allocating inspection, quality, and information risks limits mistake-based attacks.
Speed: clear templates and workflows reduce negotiation cycles.
Best practices & templates (drafting tips; clause library; workflow)
Start from a jurisdiction-aware template. Include an assumptions section. Add risk-allocation language. Keep a clause library (entire agreement, written modifications, inspection/acceptance). Train teams to spot “we assumed” language.
Classic mutual mistake: both parties contract for goods they think exist, but they were destroyed. Rescission likely if no risk allocation.
Unilateral pricing error: seller miskeys a price and buyer tries to snap it up. Possible rescission if buyer knew or enforcement would be unconscionable.
Peerless-style ambiguity: each party had a different ship or lot in mind. No contract formed.
English-law scenario: performance still possible though harder. Contract stands under Great Peace.
What is “common mistake contract law”?
It’s when both parties are wrong about the same basic fact at the time of contracting. Under Restatement §152, the contract can be voidable if the mistake is material and no one assumed the risk.
How is that different from unilateral mistake?
Unilateral mistake affects only one party. Relief is narrower unless the other side knew, caused, or is trying to benefit from an obvious error.
Can we fix a contract law mistake without canceling the whole deal?
Yes — that’s reformation/rectification. If you can prove the written terms don’t match the real agreement, a court may rewrite, not tear up, the contract.
Do integration clauses stop mistake claims?
They make it harder to use prior statements, but they don’t fully block claims based on mutual mistake in expression or fraud.
What if the contract wasn’t in writing?
Statute of frauds may block enforcement, but there are exceptions like part performance and merchant confirmations.
Which law applies — Restatement, UNIDROIT, or English law?
Whichever your contract or forum says. That’s why a governing-law clause is essential.
Can businesses contract out of mistake rules?
To a large extent, yes. Assumption-of-risk and non-reliance clauses can make later mistake claims fail.
Not legal advice. Contract outcomes depend on facts and governing law. U.S. follows Restatement-style voidability; England & Wales applies a stricter, “radically different” test; international contracts may follow UNIDROIT.
Common / mutual mistake: Both parties share the same false assumption about a basic fact.
Unilateral mistake: Only one party is mistaken; relief needs knowledge or unfairness.
Rescission: Unwinding the contract and restoring parties to pre-contract position.
Reformation / rectification: Court rewriting the contract to reflect actual agreement.
Assumption of risk (Restatement §154): When a party agrees to bear the risk that an assumption is wrong.
Parol evidence rule: Limits using prior/oral statements to contradict a final written contract.
Statute of frauds: Certain contracts must be in writing to be enforced. UCC §2-201 / §2-202 / §2-209: U.S. rules for written requirements, parol evidence, and modifications in sales of goods.
Ambiguity (Peerless): Term can reasonably mean two different things, so no meeting of minds.
