Mistake
Author | John D. McCamus |
Pages | 576-654 |
576
CHAPTER 13
MISTAKE
A. INTRODUCTION
A party who has entered into an agreement labouring under a mistake
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.
Alternatively, such a party may wish to seek a revision of the agree-
ment that will bring 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 mistakes 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 rests 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 varies from one type of mistake to
another and, accordingly, a threshold question to be addressed in any
examination of the law of contractual mistake is to fashion appropri-
ate categories of the kinds of mistakes 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 division between mistakes that prevent formation of the
Mistake 577
agreement, here referred to as “misunderstandings,” and mistakes 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, respectively, 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 mistaken assumptions case, on the other hand, the
parties have reached an adequate consensus ad idem.4 They share an
understanding of what the contract me ans 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 assumption relates to
the reasons for entering into t he agreement rather than one’s awareness
of the actual terms of the agreement. Whether the mistake is a misun-
derstanding with 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 may be to make the transaction sur-
prisingly unattractive for one of the parties, once the truth is revealed.
The party who has been disadvantaged by the mistake will wish to be
excused from the agreement. As we shall see, a variety of doctrines
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 interaction between doctrines of common
law and equity in some aspects of the law of mistake.
A third type of mistake, here referred to as a “mistake in integra-
tion,” occurs when the agreement as negotiated by the parties is incor-
rectly recorded in what is intended by the parties to be an accurate
written record of the agreement. Thus, in a contract for the purchase
and sale of land, the description 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
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 transfer. The party who has been disadvantaged by
the mistake is likely to wish either to withdraw from the agreement
or have the written document revised so as to accord with the initial
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 courts of equity to provide relief
of various kinds from agreements affected by misunderstandings, 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 mistake with respect to the meaning of a term would occur
where one party suffers from such a mistake 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 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 misunderstanding occurs where one party is not clear about the
correct meaning of a term or terms 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.
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