Mistake


The term mistake is used in contract law to describe the situation in which one or both of the parties to an agreement acted under an untrue belief about the existence or nonexistence of a material fact. In mistake cases, unlike fraud and misrepresentation cases where the victim is also acting under a mistaken belief about the facts, the mistaken belief about the facts is not the product of a misstatement by the other party. Mistaken in this sense does not include errors of judgment, ignorance, or a party’s mistaken belief that he or she will be able to fulfill certain obligations under a contract. The things that were said about materiality and fact in the law misrepresentation hold true in mistake cases.

In deciding mistake cases, courts often seem to be trying more obviously to do justice than in other kinds of cases. This is why decisions in mistake cases sometimes seem to depart from the announced rules of law dealing with mistake.

Mistake cases are classified as mutual or unilateral, depending on whether both or only one of the parties was acting under a mistaken belief about a material fact. Mutual mistake is always a basis for granting rescission of the contract at the request of either party. Clearly, no meeting of the minds took place and therefore no true contract was ever formed.

My Consultancy–Asif J. Mir – Management Consultant–transforms organizations where people have the freedom to be creative, a place that brings out the best in everybody–an open, fair place where people have a sense that what they do matters. For details please visit www.asifjmir.com, and my Lectures.

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Fraud by Silence


Does a party to contract have a duty to disclose to the other party all the material fact he or she knows about the subject of the contract? The original common law position on this issue was caveat emptor (let the buyer beware). The seller could remain silent without fear of being found guilty of fraud. Only actual statements by the seller could serve as a basis for fraud. The duty therefore was placed on buyers to ask the right questions of the seller, forcing the seller to make statements about the subject of the sale.

Many courts today, however, recognize that caveat emptor often produced unfair results. Some buyers simply do not know enough to ask the right questions about the subject of the sale, so many courts are recognizing a limited duty to disclose material facts on the part of the seller. Generally this duty is limited to material facts that the buyer could not have discovered by reasonable inspection of the subject of the sale.

My Consultancy–Asif J. Mir – Management Consultant–transforms organizations where people have the freedom to be creative, a place that brings out the best in everybody–an open, fair place where people have a sense that what they do matters. For details please visit www.asifjmir.com, and my Lectures.