LEGAL VIEWPOINT: The nature of mistake in contracts By Dr AbdelGadir Warsama Ghalib, Legal Counsel, Bahrain

Dr AbdelGadir Warsama Ghalib, Principal Legal Counsel, Bahrain

All business transactions are based on contracts. The contract is the intention and genuine will of the contracting parties. Both parties, are looking for an acceptable deal and must come with clean hands and minds. If, this genuine intention has been coupled with true deeds, the contract becomes a valid contract and enforceable by law.

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Sometimes there are instances wherein the contract becomes voidable contract. Mistake is one of the instances wherein the contract becomes voidable. The term “mistake” is used in contract law to describe the situation in which one or both of the parties acted under an untrue belief about the existence or nonexistence of a material fact.

In mistake, unlike fraud and misrepresentation cases in which the victim is also acting under a mistake, the mistaken belief about the facts, is not the product of a misstatement by the other party. Mistake in this sense does not include errors of judgment, ignorance, or a mistaken belief that he will be able to fulfill certain obligations under a contract.

The reason behind the idea of mistake is that such mistake may prevent the “meeting of the minds” required by contract law. In deciding mistake cases courts often seem to be trying more obliviously to do justice than in other kinds of cases. Therefore, we could say, decisions in mistake cases sometimes seem to depart from the announced rules of law dealing with mistake.

Mistake cases are either mutual or unilateral, depending on whether both or only one party was acting under a mistaken belief about the material fact. Mutual mistake is a basis for granting recession of the contract at the request of either party. In mistake, clearly no meeting of minds took place and therefore no true contract was ever formed. Mutual mistake can arise in many ways. For example, the parties may unintentionally use a term in their agreement that is ambiguous and is capable of being understood in different ways. Here, no party is at fault and either may elect to rescind the agreement, as it becomes voidable. Also, mistake arises when parties are of different stand regarding the subject-matter of the contract. This happens, when each is entering the deal with different goods in mind. Mistakes damage the contract and makes it voidable.

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