What is described as a unilateral mistake?

A unilateral mistake occurs when one party in a contract is mistaken about a fundamental aspect of the agreement, while the other party is either aware of the mistake or has reason to know about it. In this context, if one party knows that the other is mistaken and does not inform them, this can lead to issues concerning enforceability of the contract.

When one party is aware of the mistake made by the other, it highlights the asymmetry in knowledge, which is central to the concept of a unilateral mistake. This scenario can create an opportunity for unfair advantage and raises ethical considerations in contractual relationships. Moreover, this awareness can have legal implications, potentially allowing the mistaken party to void the contract upon discovering the mistake.

In contrast, instances where both parties make the same mistake or misunderstand a term do not fit the definition of unilateral since both parties share the same error, making it a mutual mistake. If all terms are understood correctly, then no mistake exists. Therefore, the scenario described aligns accurately with the characteristics of a unilateral mistake.