Question

What is the difference between a bilateral and unilateral mistake?

Answer 1

A bilateral mistake and a unilateral mistake are both types of errors that can occur in contracts, but they differ in terms of how many parties are involved in the mistake.

1. Bilateral Mistake (Mutual Mistake):
   

   - This occurs when both parties to the contract are mistaken about the same fact.
   - For example, if both the buyer and the seller believe a painting is an original, but it turns out to be a replica, this would be a bilateral mistake.
   - The mistake must be about a fact that is essential to the contract. If both parties are wrong about an important fact, the contract may be voidable (can be canceled).
   
   Example: Both parties think a car is a certain model, but it turns out to be a different model. Since both were mistaken, the contract might not be valid.

1. Unilateral Mistake:
   

   - This occurs when only one party is mistaken about a fact, while the other party knows the truth.
   - In most cases, the contract is still binding, unless the other party knew or should have known about the mistake and took advantage of it.
   - If the mistake is significant enough, the party who made the mistake might have the option to cancel the contract.
   
   Example: If a person buys a laptop for $500 because they mistakenly believe it’s a high-end model, but the seller knows it’s a basic model, the person who made the mistake might be able to cancel the contract if they can prove the other party took advantage of their mistake.

Key Differences:

1. Bilateral Mistake: Both parties are mistaken.
   

1. Unilateral Mistake: Only one party is mistaken, and the other party is aware of the mistake.
   

In both cases, the legal consequences depend on whether the mistake is considered material to the contract and if either party acted unfairly.