Mistake

• Author: John D. McCamus
• Pages: 524-598

524

CHAP TER 13

MISTAKE

A. I NTRODUC TION

A party who has entered into an agreement labouring under a mist ake

of some kind may wish to seek redress in either one of two different

forms. First, the par ty may wish to rely upon t he mistake as an excuse

for non-performance of his or her obligations under the agreement.

Alternatively, such a party may wish to seek a revision of the agree-

ment that will bring the agreement into alignment with h is or her own

mistaken perception of the nature of the obligations imposed by the

agreement. In this chapter, we examine the pos sibilities for relief of

these two dif ferent kinds.

Different kinds of mist akes may affect a party’s decision to enter

into an agreement. One might be mist aken about the meaning of the

terms of the agreement. One might enter into an agreement motivated

by a reason that rest s on false information or assumptions. One might

sign a written agreement th at does not ref‌lect one’s understanding of

the agreement reached through the negotiation process. The nature of

the relief available for mistake var ies from one type of mistake to an-

other and, accordingly, a threshold question to be addressed in a ny

examinat ion of the law of contractual mist ake is to fashion appropri-

ate categories of the kinds of mi stakes that may affect a transaction.

Although various terms are used by different writers to refer to the

various categories of mistake, there is a broad consensus that there

exists a basic div ision between mistakes t hat prevent formation of the

Mistake 525

agreement, here referred to as “misunderstandings,” and mistakes con-

cerning some matter relevant to the decision to enter the agreement,

here referred to as “mist aken assumptions.”1 In some contexts, the two

categories are referred to, respectively, as mistakes as to “terms” and

mistakes as to “motive.”2 In cases of misunderstand ing, the parties

have failed to reach an adequate consensus ad idem.3 The parties may,

for example, have different ideas about what the term s of the contract

mean. There is, one might say, no genuine or true agreement between

the parties. In a m istaken assumptions case, on the other hand, t he

parties have reached an adequate consensus ad idem.4 They share an

understanding of what the contr act means but either one or both of the

parties may have entered into the agreement on the basis of a factual

assumption that proves to be false. A mistaken a ssumption relates to

the reasons for entering into the ag reement rather than one’s aware-

ness of the actual terms of the agreement. Whether the mistake is a

misunderstanding with respect to the terms of the agreement or a mis-

taken assumption relati ng to the motives or reasons for entering the

agreement, the effect of the mista ke may be to make the tra nsaction

surprisingly unattractive for one of the parties, once the truth is re-

vealed. The party who has b een disadvantaged by the mistake w ill wish

to be excused from the agreement. As we sha ll see, a variety of doc-

trines developed, both at common law and in equity, that may achieve

thi s result in an appropriate ca se. We wil l also se e that there i s some as

yet unresolved tension in the interaction bet ween doctrines of common

law and equity in some aspects of the law of mist ake.

A third ty pe of mistake, here referred to a s a “mistake in integ ra-

tion,” occurs when the agreement as negotiated by the parties is i n-

correctly recorded in what is intended by the parties to be an accurate

written record of the agreement. Thus, in a contract for the purchase

1 For an illumin ating discussion of cl assif‌ication quest ions, see G. Palmer, Mis-

take and Unjust Enrich ment (Columbus: Ohio State University P ress, 1962) c. 1.

2 See, for example, Calgary v. Norther n Construction Co., [1986] 2 W.W.R. 426

(Alta. C.A.), aff’d [1987] 2 S.C.R. 757, [1988] 2 W.W.R. 193 [Northern Cons truc-

tion].

3 See generally Chapt er 2.

4 Thus, yet another set of cate gories that express es the distinction bet ween mis-

understandi ngs and mistaken assu mptions divides mista kes into those that

“negative” consent in t he sense of demonstrati ng that genuine consent did not

occur (here refer red to as “misundersta ndings”) and those that operate s o as to

“nullify” c onsent in the sense of provid ing a basis for relief even though con-

sent was init ially secured (here re ferred to as “mistaken a ssumption”). See Bell v.

Lever Brothers Ltd ., [1932] A.C. 161 at 217 (H.L.), Lord Atkin, rev’g [1931] 1 K.B.

557 (C.A.) [Bell v. Lever Brothers].

THE LAW OF CONTR ACTS526

and sale of land, the descr iption of the land in the written agreement

may describe a pa rcel that is larger or smaller than the parcel the par-

ties intended to tran sfer. The party who has been disadvantaged by

the mistake is l ikely to wish either to withdraw from the agreement

or have the written document revi sed so as to accord with the initial

understanding of the pa rties. Courts of equity developed the remedy of

rectif‌ication to provide the latter form of relief. In a clear ca se where the

parties reached a pr ior agreement that is not accurately recorded in the

written version of the agreement, such relief will normally be available.

The m ore dif f‌icult q uesti on is wh ether s uch rel ief sho uld be a vail able in

other ci rcumst ances.

In this chapter, then, we consider the various doctr ines developed

by the courts of common law and the court s of equity to provide relief

of various kinds from agreements affected by mi sunderstandings, mis-

taken assumptions and mistakes in integration.5 In what follows, the

term “unilateral mistake” is used to refer to situations in which only

one of the parties to the agreement labours under a mistake. Thus, a

unilateral mist ake with respect to t he meaning of a term would occur

where one party suffers from such a mi stake but the other party to

the agreement is aware of the correct meaning of the term. The term

“common mistake” will be u sed to refer to situations where both parties

to the agreement share the same mi stake. Thus, a common mistaken

assumption occurs where both pa rties suffer from the sa me incorrect

assumption concerning some factual circumstance that is material to

the decision of one or both of the parties to enter into the agreement.

B. MISUNDERSTANDINGS

1) Introduction

A misunderstand ing occurs where one party is not clear about the cor-

rect meaning of a term or terms of the agreement or where both parties

5 Mistakes ma y also arise in the conte xt of the performance of an ag reement.

Thus, for example, one might pa y a debt for a second time, having forgotten

that the debt had a lready been paid. In the nor mal case, such a second payme nt

should be and is recover able in a restitutionar y claim for the recovery of the

money paid under a mist ake. See generally P.D. Maddaugh & J.D. McCamus,

The Law of Restitution , 2d ed. (Aurora: Canada Law B ook, 2004) c. 10. The prob-

lem of mistake n overperformance and t he restitutionary rel ief therefor does not

raise is sues concerning the enforce ability of contractual obl igations and will

not be further con sidered here.