Restatement Second of Contracts: Unilateral Mistake Explained

The Restatement Second of Contracts is a legal document that provides guidance on the interpretation and application of contract law in the United States. One of the key areas covered by the document is unilateral mistake, which occurs when one party in a contract makes an error that affects the terms of the agreement.

In this article, we will explore what the Restatement Second of Contracts says about unilateral mistake, including its definition, types, and how it impacts the validity and enforceability of a contract.

Definition of Unilateral Mistake

According to the Restatement Second of Contracts, a unilateral mistake is a situation in which only one party to a contract is mistaken about a fundamental fact that is essential to the agreement. The mistake must be made in good faith, meaning that the party did not intentionally misrepresent the fact or deceive the other party.

Types of Unilateral Mistake

There are two types of unilateral mistake: mistake of fact and mistake of law. A mistake of fact occurs when one party is mistaken about a fact that is essential to the agreement, such as the identity of the other party, the nature of the subject matter, or the terms of the contract. A mistake of law, on the other hand, occurs when one party is mistaken about the legal implications of the contract, such as the applicability of a law or regulation.

Effect of Unilateral Mistake on the Validity and Enforceability of a Contract

The Restatement Second of Contracts provides that a unilateral mistake does not necessarily make a contract invalid or unenforceable. However, the effect of the mistake on the validity and enforceability of the contract depends on several factors, including the following:

1. Materiality of the mistake – If the mistake is material, meaning that it affects a fundamental aspect of the contract, then the contract may be voidable by the mistaken party.

2. Risk allocation – If the risk of the mistake is allocated to the mistaken party in the contract, then the contract is generally enforceable even if the mistake is material.

3. Unconscionability – If the mistake is so significant that enforcing the contract would be unconscionable or unfair, then the contract may be unenforceable.

4. Waiver – If the mistaken party knew or should have known of the mistake but still agreed to the contract, then the party may be deemed to have waived the mistake and the contract will be enforceable.

Conclusion

Unilateral mistake is a complex area of contract law that requires careful consideration of the facts and circumstances of each case. Understanding the principles outlined in the Restatement Second of Contracts can help parties and their attorneys navigate this area and make informed decisions about the validity and enforceability of their contracts.