A unilateral mistake is the most common type of mistake. It occurs when just one party in a contract misunderstands its terms or provisions or intentionally does not fulfill them. Most times, a unilateral mistake does not void a contract, unless the mistake led to a positive one-sided result for the mistaken party.
A unilateral contract occurs when one party fails to perform a legal obligation.
Components of a Contract and Unilateral Mistakes
When one required element of a contract are missing, the contract is not effective. For a contract to be valid, basic components need to be met including parties of the contract understanding the terms found in the agreement. When a party of a contract does not understand the legal implications of the contract they are signing, the court may consider making the contract not valid. This is rare and typically involves parties that were minors or failed to have the capacity to make decisions.
Most mistakes in a contract are unilateral-that is one party failed to perform a legal obligation. In absence of missing components of the valid contract requirements, the contract will be found valid.
Effect of Unilateral Mistake
A mistake on the part of one party of a contract can greatly change the outcome of an agreement. Particularly when money is the reason for a unilateral mistake, the rights of the damaged party are infringed upon and therefore the party making the unilateral mistake will likely be required to perform an action and/or pay a fine.
Depending on the circumstances of the mistake, the party that made the mistake may have the ability to cure the defects by either paying a fine or performing a legal obligation. Some mistakes have the power to affect the terms of the other party. For example, imagine two partners own real estate with a mortgage and both are signers on the mortgage, if one of the partners fails to make the mortgage payment, both parties credit scores will be effected.
