Mutual mistakes are those endorsed by and equally the responsibility of both parties. These occur when both parties believe something to be a fact that later turns out to be untrue. In British practice this is called a common mistake. In Sherwood v. Walker the common mistake was that both parties believed the cow to be barren. When she became with calf, the contract was voided because the erroneous belief had significantly altered the value of the cow and the substance of the contract.
The Supreme Court in Michigan ruled that the mutual mistake was enough to invalidate the contract. Another example of a mutual or common mistake would be a contract between a shipping service and a customer to import certain household goods into another country. If both parties believed the shipment to be legal, and in the end the items could not be imported, the contract would likely be nullified as the legality of the shipments substantially changed the agreement.
A mistake of identity occurs in one of two ways. One, a contract writer fails to obtain adequate information regarding the actual identity of one of the parties and misidentifies the aprty in the contract language either through a misspelling or use of a common name rather than legal name. these types of mistakes generally have little effect on the nature of the contract and in the event of a dispute, so long as both parties knew who they were dealing with, the contract is considered valid.
The more insidious and potentially dangerous form of a mistake of identity occurs when one party believes the other party in the negotiation to be something or someone they are not. For example, if a person chose to approach an author about purchasing their novel and represented themselves as an agent of a major film production company, but in fact had no affiliation with that company, there would be said to be a mistake of identity.
The author might agree to sell their work believing that they had contracted for a major motion picture only to later discover that they had actually sold their work to a brokerage or agent. In these cases, the court would rule based on the affect that the false identity had on the substance of the contract. There are several types of common mistakes made in contract law writing and most of them are avoidable. Perhaps the most common type of mistake in contractual law is failing to identify properly all the parties to the contract.
(Davis 2007) This can be particularly tricky because sometimes people are used to dealing with a person as an individual and find that in terms of the contract, they need to list the person under their corporate identification. Or, a company may have a name by which it is commonly known which is different from the legal name that should be included in the contract. For example, a bottling company in Marion, Illinois, is known to local residents as Marion Pepsi, but the official corporate title is Pepsi Mid-America.
Referring to it as Marion Pepsi would be a mistake of fact. Another common mistake in contract law is failing to properly define the terms of the contract. This may seen redundant, especially when companies have done business together for long periods of time, but many contract dispute could be avoided if those making the contract had simply included specific language regarding who pays the shipping costs, what the delivery time frame will be, and what happens in the event of a change in economic conditions related to the contract. (Davis 2007)
Contracts also often fail to discuss the specific terms under which a contract ends. This can be particularly important in relationships with suppliers. If the contract does not specify, for example, how many widgets will be supplied at a specific price or the time frame during which these widgets will be supplied, a contract dispute could arise on either side. The buyer could potentially demand that widgets be made available at that price in perpetuity or could argue that they agreed simply on a price for widgets if any were to be purchased.
The supplier might argue that the contract price covers only 10 widgets and only if they are purchased within three weeks of the contract signing. Another common mistake in contract writing is the failure to identify how disputes will be resolved (Davis 2007). Related mistakes are failing to specify who pays attorneys’ fees in the event of a dispute and what law has jurisdiction. This comes up when parties to the contracts are from different states or different countries. It is very important to note which laws take precedence. In short, most of the mistakes made in contract law are due to oversight and assumption.
People assume that things will work the way they have always worked and fail to spell that out in the contract; people overlook details like when the contract will be applicable and it then never applies. One early case of contract law which reached the Michigan Supreme Court illustrates very clearly the need to define every aspect of the interaction covered by the contract. In the case of Sherwood v. Walker, Walker attempted to purchase a cow that everyone believed to be barren for use as beef. After the sale agreement, but before the cow was delivered, it was determined that she was with calf and therefore much more valuable as a breeder.
The owners attempted to terminate the sale agreement by failing to deliver the cow. They argued that she was a substantially different “thing” at that point and should be exempted from the previous sale agreement. (Sherwood v. Walker 1887). Though this is an ancient case, the lesson learned from it is still the same. The items being discussed in the contract must be spelled out specifically. The court ruled initially that Walker was entitled to the cow and that was overturned on appeal, largely due to the fact that both parties testified that they believe the cow to be barren.
The court rules that discovering her fertility changed the basic facts of the contract and nullified it. They sent the case back to the lower court for a new trial (Sherwood v. Walker 1887). There are dozens of other cases that echo these principals of contract law and others which attempt to determine when a mistake can invalidate a contract and when parties to a contract are held to the contract regardless of mistakes. These types of questions are particularly common in the building industry when mistakes in a bid, which is a form do contract, sometimes cost the bidder thousands of dollars (Construction Law 2004).