Contracts and Sales Multistate Bar Practice Exam

What is the result when one party makes a unilateral mistake?

1. The contract is always void

2. The contract is voidable by the mistaken party if the other party knew of the mistake

3. The contract remains valid regardless of the mistake

4. The mistaken party can demand a new contract

The correct answer is: The contract is voidable by the mistaken party if the other party knew of the mistake

When one party makes a unilateral mistake, the contract can be voidable by the mistaken party, particularly if the other party had knowledge of that mistake. In many legal jurisdictions, a unilateral mistake does not automatically render a contract void; rather, it places the burden on the mistaken party to demonstrate that the error significantly affects the agreement and that the other party had actual or constructive knowledge of the misunderstanding. For instance, if a party enters a contract believing that an item is in perfect condition when the other party is aware that it is defective, the mistaken party may opt to void the contract because they were misled based on a belief that was not reciprocated by the other side. This is rooted in principles of fairness and equity, as individuals should not be held to agreements that they entered based on significant misunderstandings of the terms or circumstances involved. The other options present misleading scenarios. A unilateral mistake does not always make a contract void, nor does it mean the contract remains valid without consideration of the mistake. Furthermore, the mistaken party cannot unilaterally demand a new contract simply because they made an error; it involves a process of negotiation and potential reformation, which is contingent on specific circumstances surrounding the mistake.