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Mistake of Fact: Where both the parties into an agreement are under a mistake as to a matter of fact essential to the agreement, the agreement is void.
A unilateral mistake is where only one party to a contract is mistaken as to the terms or subject-matter contained in a contract. This kind of mistake is more common than other types of mistake. One must first distinguish between mechanical calculations and business error when looking at unilateral mistake. For mechanical calculations, a party may be able to set aside the contract on these grounds provided that the other party does not try to take advantage of the mistake, or 'snatch up' the offer (involving a bargain that one did not intend to make, betrayed by an error in arithmetic etc.). This will be seen by an objective standard, or if a reasonable person would be able to know that the mistake would not make sense to one of the parties. Unless one of the parties 'snatched up' the one-sided offer, courts will otherwise uphold the contract.
Conversely, when a party is guilty of an error in business judgment, there is no relief.
The test to determine the allocation of risk is as follows: A defendant should bear the risk of the mistake if: (i) the agreement allocated the risk to the defendant; (ii) the defendant was aware of having limited knowledge with respect to the facts to which the mistake related but treats his limited knowledge as sufficient; or (iii) the court finds that it is reasonable under the circumstances to allocate the risk to the defendant.As any area of law, any doctrine has its exceptions. In Speckel v. Perkins,[Case 4] there was a unilateral mistake by one of the parties. However, the mistake should have been apparent to a reasonable person in the position of the party who did not make the mistake. The court determined that the offer of US$50000 was, on its face, clearly a mistake. The correct amount, as both parties were aware, was for US$15000. The question raises, at what point will the unilateral mistake become so apparent that it leaves unilateral mistake theory and enters into mutual mistake doctrine?