Mistake

• Author: John D. Mccamus
• Profession: Professor of Law. Osgoode Hall Law School, York University
• Pages: 494-565

CHAP TER 13

MISTAKE

A. INTRODUCTION

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 party may wish to rely upon the mistake as an excuse

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

ternatively, such a party may wi sh to seek a revision of the agreement

that will br ing the agreement into align ment with his or her own mi s-

taken perception of the nature of the obligations imposed by the agree-

ment. In this chapter, we examine t he possibilities for relief of these

two different kinds.

Different kinds of mist akes may affect a pa rty’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 ref‌l ect one’s understanding of

the agreement reached through the negotiation process. The nature of

the relief available for mistake varies from one ty pe of mistake to an-

other and, accordingly, a threshold question to be addressed i n any

examinat ion of the law of contractual mi stake is to fash ion 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 mist ake, there is a broad consens us that there

exists a basic division between mi stakes that prevent format ion of the

494

Mistake 495

agre ement, here referred to as “mi sunderst andings ,” and mis takes con-

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

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

categories are referred to, respect ively, as mistakes as to “terms” and

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

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

for example, have different ideas about what the terms 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, the

parties have re ached an adequate consensus ad idem.4 They share an

understanding of what the contract means but either one or both of the

parties may h ave entered into the agreement on the basis of a factual as-

sumption that proves to be false. A mistaken as sumption relates to the

reasons for entering into the agreement rather than one’s awareness of

the actual terms of the agreement. Whether the mista ke is a misunder-

standing with respect to the terms of the agreement or a mistaken as-

sumption relating to the motives or reas ons for entering t he agreement,

the effect of the mistake may be to make the t ransaction sur prisingly

unattractive for one of the parties, once the truth is reve aled. The party

who has been disadva ntaged by the mista ke will wish to be excused

from the agreement. As we shall see, a variety of doctrine s developed,

both at common law and in equity, that may achieve t his result in an

appropriate case. We will also see that there is some as yet unresolved

tension in the interaction between doct rines of common law and equity

in some aspects of the l aw of mistake.

A third ty pe of mistake, here referred to as a “mistake i n integra-

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

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

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

and sale of land, the descr iption of the land in the wr itten agreement

1 For an illumin ating discussion of c lassif‌i cation question s, see G. Palmer, Mis-

take and Unjust Enr ichment (Columbus: Ohio State Universit y Press, 1962) c. 1.

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

(Alta. C.A.).

3 See generally Ch apter 2.

4 Thus, yet another set of c ategories that expre sses the distinct ion between mis-

understandi ngs and mistaken ass umptions divides mist akes into those that “ne ga-

tive” consent in t he sense of demonstrati ng that genuine consent did not occ ur

(here referre d to as misunderstand ings) and those that operate s o as to “nullify”

consent in the se nse of providing a basis for re lief even though consent was in-

itially se cured (here referred to a s mistaken assumpt ion). See Bell v. Lever Broth ers

Ltd., [1932] A.C. 161 at 217 (H.L.), Lord Atk in, rev’g [1931] 1 K.B. 557 (C.A .).

THE LAW OF CONTR ACTS496

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 disadvant aged by

the mistake is likely to wish either to withd raw from the agreement

or have the written document rev ised so as to accord with t he initial

understanding of the parties. Courts of equit y developed the remedy of

rectif‌i cation to provide the latter form of relief. In a c lear case where the

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

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

The more di ff‌i cult question is whether such relief should be available

in other circumst ances.

In this chapter, then, we consider the var ious doctrines developed

by the courts of common law and t he courts of equity to prov ide relief

of various kinds from agreements affected by misunderstandings, mis-

taken assumptions and mistakes i n 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 mistake with respect to the meaning of a term would occur

where one party suffers from such a mist ake but the other party to the

agreement is aware of the correct meani ng of the term. The term “com-

mon mistake” will be used to refer to situations where both parties to

the agreement share the same mistake. Thus, a common mistaken a s-

sumption occurs where both parties suffer from the same incorrect a s-

sumption concerning some factual circumstance that is material to t he

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

B. MISUNDERSTANDINGS

1) Introduction

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

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

understand the meani ng of a term or terms differently, neither under-

5 Mistake s may also arise in t he context of the performance of a n agreement.

Thus, for example, one might p ay a debt for a second time, having forgotten

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

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

money paid under a mi stake. See generally P.D. Maddaugh and J.D. McCamus,

The Law of Restitut ion, 2d ed. (Aurora: Canada La w Book, 2004) c. 10. The prob-

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

raise is sues concerning the enforc eability of contractua l obligations and will

not be further con sidered here.