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Bilateral Mistakes: Everything You Need to Know

A bilateral mistake is a mutual legal mistake that arises when two parties are falsely working on false information—this can be difficult as the parties have a wrong interpretation of the contract terms. At times it’s impracticable to attain the contract’s requirements when both parties aren’t aware of the specified terms of the agreement. 

Bilateral Mistakes

Types of Legal Bilateral Mistakes

The two categories of potential mistakes that can occur in legal contracts are:

  • Mistake of law.
  • Mistake of fact.

1. Mistake of Law

A mistake of law comes about when both parties are misinformed on the legal innuendos of a contract with regards to their present location—either on native land or non-native land. There are two types of mistake of law that can arise in a contract:

  • Mistake of home law: This arises when the parties involved are mistaken in terms of the laws of their native land. The parties should meet the contract terms in a mistake of home law—there are legal consequences if the parties don’t meet the terms. This mistake can’t be sustained in a court because it’s assumed that the parties should be well informed on the laws set in their residential area. 

Bilateral Mistakes

  • Mistake of foreign law: This takes place when both parties are mistaken about foreign laws. Even though the parties must meet the terms of the contract, there is a possibility of forgiveness in Indian courts—the assumption is that the parties can’t pragmatically be aware of every law in foreign lands.


Mistake About A Foreign Law

Section 21 states that a mistake of foreign law ought to be handled as a mistake of fact—as the parties involved in the contract are not expected to be informed on every single provision and meaning of the foreign law. Therefore, if any mistake concerning the foreign law arises in a case by both parties, the contract will be null and void.

For instance, if a company in India agrees to trade 300 cans of a particular mixture containing 46% sulphuric acid with America. The laws of America had prohibited the sale and purchase of substances containing above 30% sulphuric acid—this is a mistake of foreign law; consequently, the contract is declared null.

Mistake of Fact

A mistake of fact emerges when one or both parties suppose that it’s aware of the facts of the contract, yet either of the parties is working under erroneous information. Mistakes of facts are divided into two groups, namely: 

Bilateral Mistakes

  • Bilateral mistake of fact: This mistake arises when the parties involved are ill-advised on some specific terms of the contract—this is a common or mutual mistake. Usually, both parties involved in the contract can invalidate a bilateral mistake as they act under inaccurate information.
  • A unilateral mistake of fact: This mistake arises when a single party is misinformed on the contract terms. Although this mistake can lead to the nullification of a contract, it is often not a reason enough to cancel a contract. The gravity of the mistake always determines whether the contract will be voided or not—the other party can also decide whether to revoke or not.   

Types of Bilateral Mistakes

Bilateral mistakes are in two categories:

  1. Subject Matter Mistakes

These mistakes arise when the parties of the contract commit a mistake concerning the subject matter of the contract—this usually leads to the cancelation of a contract. The commonly made mistakes include:

  • Existence of subject matter: This happens when both parties consent to terms that don’t exist anymore—this could emanate from loss of inventory, lack of shipping, or any other cause that limits the existence of particular terms in the contract.
  • Mistake of quantity: This arises when both parties are misinformed on the quantity involved in a specific term in the contract.

  • Mistake of identity: This takes place when the parties involved have divergent subject matter identity expectations.
  • Mistake of quality: This happens when both parties have different expectations of the product quality.
  • Mistake of price: This arises when either party mistakes the price of the subject matter.
  • Mistake of title: This happens when one party mistakenly expects the other party to have a proprietorship to complete the contract terms.

b) Possibility of Performance Mistake

This mistake arises when one party mistakes the capability of the other party to fulfill some specific contract terms—the contract is nullified depending on the incapacity of a party to complete the tasks. Possibility of performance mistakes can occur when either party is incapable of meeting the terms of the contract based on either physical or legal grounds.

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Unilateral Exceptions

There is always a possibility of having exceptions involved with any unilateral mistake—samples of the common exceptions are:

  • Mistake of identity:  If the mistake is biased to identity, the contract can be invalidated.
  • Nature of contract mistake: If only a single party mistakes the nature of the contract, then there is a possibility of nullifying the contract.

What Are The Types Of Bilateral Mistakes With Examples

A bilateral mistake arises when both groups involved in a contract commit a mistake of fact that’s important to the agreement. In this case, the parties involved have not agreed on the same matter in the same manner—this is the meaning of consent. Since there is a lack of agreement, the contract is declared null and void.

Bilateral Mistakes

However, to declare a contract null, the mistake of fact must be concerning a necessary fact that is very significant to the terms of the contract. With regard to this, if the mistake involves the existence of the title or the subject matter, price, quantity, and quality, then the contract can be voided. On the other hand, if the mistake is about something insignificant, the agreement still holds, and the contract will stay in place.

For instance, X agrees to sell her buffalo to Y. But at the moment of agreement, the buffalo had already passed on without the knowledge of either X or Y—therefore, the contract is nullified as a result of a mistake of fact.

How Are Bilateral And Unilateral Contracts Alike?

Parties can break both unilateral and bilateral contracts. Consider the terms ‘breach’ and ‘break’ interchangeable—this indicates that a breach of contract is regarded as a broken contract resulting from failing to perform any condition of a contract without a valid, legal excuse.

Any circumstance in which the individual offering to pay in exchange for a performed act refuses to pay is a form of a broken unilateral contract. For instance, if you promise $100 for the release of your canine but then refuse to pay because you believe the person who returned the dog stole him, you would most likely be in breach of contract since you broke your word regarding the payment.

Bilateral Mistakes

You can also break bilateral agreements. You may breach a bilateral contract if a colleague refuses to perform their shares of a job, when an employee violates the terms of the job contract, or when a client forbids the contractor from fulfilling the obligation of completing the project at hand.

If you wish to enforce a bilateral or unilateral contract in court, you must also demonstrate the same requirements. In each case, you must establish:

  • There was a contract.
  • The agreement was broken.
  • You had a setback.
  • The individual you’re accusing was to blame.

What’s The Difference Between Bilateral And Unilateral Contracts?

The number of individuals or parties promising activity is the most evident distinction between bilateral and unilateral contracts at first appearance. 

Bilateral contracts need at least two parties, whereas unilateral contracts just require action on one.

Unilateral contracts involve the party delivering the transaction to pay only when a particular act or activity is accomplished, but bilateral contracts allow for an advance payment.

Related Questions 

1. What Is A Common Mistake In The Law Of Contract?

A common mistake in contract law occurs when both contracting parties are incorrect about the same condition of events. This situation can be due to a misunderstanding of either the topic content or the title.

2. What Is The Effect Of A Mistake Of Fact?

In the context of criminal law, the effect of a mistake of fact is a misapprehension of the truth that, if true, would have justified the conduct or omission that is the subject of the prosecution. A reasonable error of fact, in general, is a defense to a charge of a crime if it eliminates the intent component of the offense.

3. How Does A Mistake Affect A Contract?

A mistake can affect a contract because it is a substantial fact misunderstanding between the parties in a contract. A joint error will only impair the contract’s legality if the mistake is so fundamental that it invalidates consent. If the error lies at the heart of the contract, the agreement will be invalid.

4. What Is A Mutual Mistake In Law?


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When the parties to a contract are both incorrect about the same material truth in their contract— this is a mutual mistake in law. If the parties work in opposing councils and agree, but both parties are wrong, the contract becomes voidable.

Bilateral Mistakes

5. Is A Mistake Of Fact Punishable?

No, a factual mistake is only a defense if it invalidates a substantial part of the offense. If your factual error prevents this or another factor from being present, you have a defense and cannot be convicted. Not only must your factual error negate some aspect of the offense, but it must also be a genuine error.


About Sonia Kukreja

I am a mother of a lovely kid, and an avid fan technology, computing and management related topics. I hold a degree in MBA from well known management college in India. After completing my post graduation I thought to start a website where I can share management related concepts with rest of the people.