This section is from the book "The Law Of Contracts", by William Herbert Page. Also available from Amazon: Commercial Contracts: A Practical Guide to Deals, Contracts, Agreements and Promises.
Mistake is a term which includes a number of distinct legal concepts, which have in common no more than this, that the party seeking relief was not aware of some fact or rule of law when he entered into the contract in question. A general definition of mistake, which, like an accurate definition will at least indicate the extent and limits of the thing defined, is practically impossible.1 In the first place, mistake may be (1) of fact, or (2) of law. In the second place, in determining how far mistake is operative we must ascertain (1) whether it affects the execution and the essential elements of a contract, or (2) whether it affects some collateral material matter, or (3) whether it affects some collateral immaterial matter; or (4) whether the parties have made a valid oral contract free from mistake, but a mistake in expressing its terms has been made in reducing it to writing, or (5) whether payment has been made under mistake where no liability in fact existed. Each of these forms of mistake is so essentially different from the others in its nature, and often in its legal effects, that no definition covering all these diverse forms can be framed. However, some definitions, helpful if not comprehensive, have been attempted. Mistake in the broad sense of the term is said to be "that result of ignorance of law or of fact, which has misled a person to commit that which, if he had not been in error, he would not have done."2 "A mistake of fact is an unconscious ignorance or forgetfulness of the existence or non-existence of a fact, past or present, material to the contract."3
11 United States Fidelity & Guaranty Co. v. First Nat. Bank, 233 111. 475, 84 N. E. 670.
1 "To formulate an accurate and practically applicable definition of the mistake of fact which will warrant rescission of a contract, has been apparently well nigh the despair of law writers. Indeed, no definition or general rule has been invented which is sufficient or accurate, except by immediately surrounding it with numerous exceptions and qualifications more important than itself. This is not surprising, in view of the fact that the whole doctrine is an invasion or restriction upon that most fundamental rule of the law, that contracts which parties see fit to make shall be enforced, and in view of the further consideration that one or both of the parties is often, if not usually, ignorant or forgetful of some facts, thoughtfulness of which might vary his conduct": Kowalke v. Light Co., 103 Wis. 472, 74 Am. St. Rep. 877, 79 N. W. 762.
2 Chicago, etc., Ry. v. Hay, 119 111. 493, 504, 10 N. E. 20 [quoting 3 Jeremy Eq. Jure. 358; quoted in Story Eq. Juris. Sec. 110].
Many things, therefore, that are termed mistakes in popular language are not mistakes within the meaning of that term at law or in equity. A fact which is still in the future when the parties make their contract may not come to pass as one or both expect, but this is not mistake.4 No matter how disastrous to the hopes and expectations of one of the parties, the actual outcome of the transaction may be mistake, in the legal sense, does not exist. The fact that subsequent circumstances make the performance of a contract more burdensome to one party than was anticipated, is not ground for avoiding such contract.5 The fact that the injured person does not recover as rapidly as he expected to, does not amount to a mistake for which a contract compromising a claim for personal injuries may be avoided.6
While an erroneous belief, due to the statement of the adversary party should be classed as fraud or misrepresentation,7 it is sometimes called mistake.8 Fraud and misrepresentation as to the essential elements of the contract are often classed as mistake and the term "fraud" is thus restricted to fraud in the inducement, as to the characteristics and qualities of the subject-matter or the adversary party, or as to some collateral fact.9 Because of this confusion, probably, many of the cases which are explained by the courts on the theory of mistake are really cases of fraud.
In Georgia, ignorance and mistake are distinguished.10 Ignorance is said to apply to a total want of knowledge upon the point in question, while mistake applies to partial or inaccurate information which results in an erroneous belief.11
3 Pom. Eq. Juris. Sec. 839 [quoted in KowaJke v. Light Co., 103 Wis. 472, 74 Am. St. Rep. 877, 79 N. W. 762].
4 Tatman v. Philadelphia, Baltimore & Washington R. Co. (Del.), 85 Atl. 716.
5 White v. Snell, 35 Utah 434, 100 Ac. 927.
6 Borden v. Sandy River & Rangeley Lakes R. R. Co., 110 Me. 327, 86 Atl. 242.
7 See Sec. 217 and 218.
8 Freeman v. Croom, 172 N. Car. 524, 90 S. E. 523.
9 "Fraud only becomes important, as such, when a sale or contract is complete in its formal elements, and therefore, valid unless repudiated,. but the right is claimed to rescind it": Rodliff v. Dallinger, 141 Mass. 1, 55 Am. Rep. 439, 4 N. E. 805 [quoted in Kelfly Asphalt Block Co. v. Barber Asphalt Paving Co., 211 N. Y. 68, L. R. A. 1915C, 256, 105 N. E. 88].
10 Langston v. Langston, 147 Ga. 318, 93 S. E. 892.
11 Langston v. Langston, 147 Ga, 318, 93 S. E. 892.
The persistent confusion on the subject of mistake has caused it to be regarded as a form of failure of consideration on the one hand and impossibility of performance on the other. Mistake as to the existence of a subject-matter is occasionally explained in the same opinion as making the contract impossible of performance and as preventing the existence of the contract.12