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Rectifying a mistake in the terms of a contract

There is a mistake in the terms of my contract.  Can a contract be varied, rectified or ended if there is a mistake in the contract and under what circumstances?

mistake in contract
Is there any recourse if you find a substantial mistake in a contract you have agreed to?

Yes, sometimes factors exist which will impact on an otherwise valid contract.

Sometimes, where there is a mistake concerning a fundamental matter, the mistaken party can apply to the courts for relief.  The courts may order that the contract should be rectified to give effect to the parties’ original intentions or may even order that the contract be terminnated if appropriate.

Examples of mistake that may impact on a contract:-

  1. Common mistake – each party is mistaken about the same thing;
  2. Mutual mistake – each party is mistaken but about different things;
  3. Unilateral mistake – one person is mistaken and the other party either knows about the mistake but does not bring it to the other parties’ attention or should know about the mistake.

A contract can be amended to rectify a mistake, by the mutual agreement of both parties.  However, if the other party is not open to this course of action, you can apply to the court for relief.

A court can determine whether a mistake exists by assessing the parties words or conduct in negotiating and concluding the agreement.  If a mistake is made in the formal step of reducing the concluded agreement or intention into writing, then the court might order relief.  This may be an order to rectify the contract to give effect to the original common intention of the parties, to correct the mistake or if appropriate, to end the contract.

As a mistake can go to the heart of a contract and have serious effects for the mistaken party (particularly if one party is unjustly enriched at the expense of the other), the mistaken party can apply to the court for the appropriate relief and the court will make a determination on the evidence before it.

The relief available from the courts include ending the contract if appropriate.  Alternatively, the courts can order a contract be rectified to give proper effect to concluded agreement.  However, the mistake must relate to a fundamental matter for the court to order relief.

Example: 

Taylor v Johnson (1983).  In this case, a Contract was entered into for the sale of land for $15,000.  However, the seller had at all times thought the sale price was $15,000 per acre.  The court accepted that the seller was mistaken and in addition, found that the purchaser had knowledge of the seller’s mistake in the contract but made no effort to bring it to the seller’s attention, probably in an attempt to profit out of it.  The court ended the contract.

More information?

Stating the parties to a contract correctly

How to sign or execute a contract

Is a verbal agreement legally binding?

 

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