Mistake

• Author: John D. McCamus
• Pages: 576-654

576

CHA PTER 13

MISTAKE

A. INTRODUC TION

A party who has entered into an agreement labouring under a mistake

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

forms. First, the part y may wish to rely upon the mistake a s an excuse

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

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

ment that will bri ng the agreement into alignment with his or her own

mistaken perception of the nature of the obligations imposed by the

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

these two different kinds.

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

into an agreement. One might be mistaken 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 that 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

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

examination of the law of contractual mistake is to fa shion appropri-

ate categories of the kinds of mist akes 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 consensus that there

exists a basic division between mistake s that prevent formation of the

Mistake 577

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

cerning some matter relevant to the deci sion to enter the agreement,

here referred to as “mista ken 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 misunderst anding, the parties

have failed to reach an adequate conse nsus ad idem.3 The partie s 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 mistaken assumptions ca se, on the other hand, the

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

understanding of what the contract me ans but either one or both of the

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

assumption that proves to be fal se. A mistaken assumption relates to

the reasons for entering into t he agreement rather than one’s awareness

of the actual terms of t he agreement. Whether the mistake is a mi sun-

derstanding wit h respect to the terms of the agreement or a mistaken

assumption relating to the motives or reasons for entering the agree-

ment, the effect of the mistake m ay be to make the transact ion sur-

prisingly unattractive for one of the parties, once the truth is revealed.

The party who has been disadvantaged by the mistake w ill 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 this

result in an appropriate case. We will also see that there is some as yet

unresolved tension in the interact ion between doctrines of common

law and equity in some aspect s of the law of mistake.

A third ty pe of mistake, here referred to as a “mist ake in integra-

tion,” occurs when the agreement as negotiated by the partie s is incor-

rectly recorded in what is intended by the par ties to be an accurate

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

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

1 For an illumin ating discussion of cla ssif‌ication questions, s ee G Palmer, Mistake

and Unjust Enrichme nt (Columbus: Ohio State Un iversity Press, 1962) ch 1 [Palmer].

2 See, for example, Calgary v Nort hern Construction Co, [1986] 2 WWR 426 (Alta

CA), aff’d [1987] 2 SCR 757, [1988] 2 WWR 193 [Northern Constr uction].

3 See generally Ch apter 2.

4 Thus, yet another set of categor ies that expresse s the distinction betwe en

misunderst andings and mista ken assumptions divide s mistakes into tho se

that “negative” consent in t he sense of demonstrating t hat genuine consent did

not occur (here refer red to as “misundersta ndings”) and those that operate so

as to “nullif y” consent in the sense of prov iding a basis for relief even t hough

consent was in itially secured (here re ferred to as “mistaken a ssumption”). See

Bell v Lever Brothers Ltd (sub nom Lever B rothers Ltd v Bell), [1931] 1 KB 557

(CA), rev’d [1932] AC 161 at 217 (HL) [Lever Brothers].

THE LAW OF CONTR ACTS578

may describe a parcel 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 revised so as to accord with the initi al

understanding of the parties. Courts of equity developed the remedy of

rectif‌ication to provide the latter form of relief. In a clea r case where the

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

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

The more diff‌icult question is whether such relief should be available in

other circumstances.

In this chapter, then, we consider the various doctrines developed

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

of various kinds from agreements affected by misunderstand ings, mis-

taken assumptions a nd mistakes in integrat ion.5 In what follows, the

term “unil atera l 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 mea ning 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 used to refer to situations where both parties

to the agreement share the same mistake. Thus, a common mistaken

assumption occurs where both parties suffer from the same incorrect

assumption concerning some factu al circumstance that i s material to

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

B. MISUNDERSTANDINGS

1) Introduction

A misunderstanding occurs where one party is not clear about the

correct meaning of a term or ter ms of the agreement or where both

parties understand the meaning of a term or terms differently, neither

understanding being, in the requisite sense, the correct meaning of

5 Mistakes m ay also arise in the conte xt of the performance of an ag reement.

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 restitutionary c laim for the recovery of the

money paid under a mi stake. See generally PD Madd augh & JD McCamus, The

Law of Restitut ion, 2d ed (Aurora: Canada Law B ook, 2004) ch 10. The problem

of mistaken ove rperformance and the re stitutionary relie f therefor does not

raise is sues concerning the enforce ability of contractual obli gations and will

not be further con sidered here.