Q.
In November 2014, Ismail agreed orally to build a house for Ali and claim the construction work will be completed by August, 2015. When the contract was written, the typist made an error by typing 'August 2016' instead of 'August 2015'. Both parties signed this contract without noticing the error. In January 2015, Ali noticed the error, and informed Ismail but Ismail refused to amend the agreement and claimed that the agreement is binding. Ali wants the new house completed by August 2015, and he seeks your advice in February 2015. Advise Ali.
(20 marks, 2015 Q5)
(15.09.2015)
A.
Both parties are aware of the mistake, or it is called 'mutual mistake', or 'bilateral mistake'. In the above case, Ali and Ismail both orally agreed to the deadline of Aug, 2015. However, the clerical or typo mistake made the contract deadline as Aug, 2016. Such mistake was not picked up by both parties - both signed on the contract thinking it was Aug, 2015.
Mutual mistake in fact, (not mistake in law) as this case is, would require the contract to be corrected (reformed, rescinded and ratified) which Ali did attempt to ask Ismail, but in vain. This being not done, the mistake becomes permanent and not true of the oral agreement in the initial stage. Thus, it is no more the same as the original contract between Ali and Ismail.
In such scenario, it is voidable ab initio - from the beginning, as the written contract is not the true reflection of the agreement in the first place.
Ali can take legal action against Ismail as Ismail has beach the contract of completion by Aug, 2015 which was the rightful deadline, and not Aug, 2016.
Issue of Mutual Mistake is explained here in Wisconsin - What happens when there is Mistake in a contract? by Sean M. Sweeney.
And, a more technical write up is at:
Mutual and Unilateral Mistake in Contract Law, 22 Journal of Legal Studies 309 (1993) (with Eric Rasmusen) by Yale.Edu.
Statute
By Contracts Act, 1950, mistake in contract is guided by Section 21 and 23. (Mistake in law is by Section 22.)
Section 21 spells out that:- agreement void where both parties are under mistake as to matter of fact - as in this case.
Section 23 on the other hand, provides:- contract caused by mistake of one party as to matter of fact - meaning only one party is aware of the mistake whereby the other party is ignorant.
S.21 says "Where both the parties to an agreement are under a mistake as to a matter of fact (typo mistake in Aug 2016 where it should be Aug 2015) essential to the agreement, the agreement is void".
A humourous article on typo is good for reading:
On Typos in Contract Drafting by Ken Adams.
Ref:
Sean M Sweeney. 2008. What happens when there is mistake in a contract? Halling & Cayo. Available at,
http://www.milwaukee-business-lawyer.com/wisconsin-mistake-in-contract/
S.21 Contracts Act, 1950.
Ken Adams. 2010. On typos in contract drafting. Adams on Contract Drafting. Available at,
http://www.adamsdrafting.com/on-typos-in-contract-drafting/