Mistake and its effect on a contract
A mistake made by one or both parties to a contract during its formation about an essential part of the contract so that there is no real agreement. The mistake can be:
1. Common mistake : both parties have made the same mistake. This makes the contract void (see void contract ) unless it is a mistake as to the quality of the goods, when the contract usually remains valid.
2. Mutual mistake : both parties have made mistakes, but different ones and they are at cross purposes. If both understandings of the contract are possible then the contract will be void but if a reasonable person would understand just one interpretation of the contract then the court will uphold that.
3. Unilateral mistake : where one party has made a mistake and the other party knew of the misapprehension or ought to have known. The contract is void if the mistake is about the terms of the contract as there has been no agreement, otherwise it will be valid.