Although either commercial or government have four elements to consider at the time of application of the “mutual mistake” doctrine, after an analysis we could infer that the sense given to these elements are a bit different between this two type of contracts; nevertheless and as starting point, both take into account that any consideration of mutual mistake needs to be based on the fact that both parties had a mistake upon the basic assumptions at the time of contracting.

In fact and provided that the latter element is present, while in commercial contracts consequences of the mutual mistake need to be material, in government contracts just a benefit from an extra work or expense of the affected party needs to be present.  I understand from this difference that the sense of this governmental element is to avoid any unbalance between parties due to a mistake, (which make sense since government purpose is not making business with a contract); while in the case of commercial contract there is not an intention of looking for a balance but avoiding unfair consequences due to a material change, which is comprehensible considering that the purpose of both parties in these contracts is related to making business along with its associated and reasonable risks.

The other difference lays on risk allocation of mistake.  The related government element states that risk is allocated to neither party under a properly constructed contract, while in commercial only the party seeking relief must not have assumed or been allocated the risk of mistake.  Depending on circumstances this could be an important difference at the time of consideration.  For instance, and please let me know if I’m wrong in my interpretation, if between two companies, Company A is contractually taking the risk of an environmental issue rising from a mistake, even if this party is committed to assume that risk and eventual expenses or direct impact; the other party (Company B) could be also affected, even at a less obvious or eventually subjective way such an internal conflict due to the company policy about this subject.  Therefore, I understand that in this case and under commercial examination, Company B can ask for contract relief but cannot do it under government consideration.  Finally and in connection with the idea presented in this paragraph, government in addition to the risk of mistake is also contemplating the condition of “additional expenses”, which is not a condition in commercial contracts.

In summary, although government and commercial elements start from the same basis at the time of consideration of mutual mistake, they apply different approaches to finally determine if a certain mistake can be considered or not as a mutual mistake.  From my point of view, the different approach is based on the purpose of the contracts, while in commercial contracts the main objective is normally related to making business along with its inherent risks, benefit or loss; government contracts are intended for the service of the community or country, therefore fair balance with intended purpose should be present.

As promissory estoppel doctrine acts over the enforceability of a promise protecting “good faith” among negotiating parties (which I think is one of the key concepts supporting commercial development), in the case of a contract modification is acting in the same sense, protecting “good faith” but now regarding contracting parties. Important aspects are that meanwhile in both cases the mutual agreement is required, consideration could not be a requirement for enforceability in the case of a contract modification.  Other important characteristic is that provided that there is not a material change and in a timely manner, a promise could be retracted, and original contract restated previous consideration of preventing any injustice by doing so.

As far as I know, civil law doesn’t have the concept of Promissory Estoppel; nevertheless, the “good faith” principle exists.  What I understand is that, at least in some countries, in practice one of the problems arising from this circumstance is that the system could be too bureaucratic giving sometimes more importance to the form rather than content, even at the time of evaluation other concepts beyond the promise itself could arise such as the balance between parties within the promise.  I also found something interesting, quoting from Nayler (2006): “In English law there is no general duty to negotiate in good faith and therefore a party breaking off negotiations will not, in the normal course of events, incur liability to the other. However, the situation can be different in other systems. The American courts have applied the doctrine of promissory estoppel (…) in the context of contractual negotiations.”

Reference:
Peter Nayler (2006). Business Law in the Global Marketplace. Burlington, MA: Elsevier Butterworth-Heinemann

I would like to comment about fixed-price contract and my understanding of the concept involved.  I understand that fixed-price is the same as lump-sum contract, which from my point of view is mainly related to the risk of quantities and prices and not necessarily to the changes of  scope of work; therefore not intended to take all related risks about construction.  For this latter scope I prefer to use the turnkey contract type, which also includes design and a wider range of risks, but at any case, also some could be dismissed.

Supporting my view, suppose A wants to build a house, and has the place for construction and has a specific and detailed design for it; A calls for a bid and uses fixed-price option.  When C started the construction, C discovers that the design for the foundations is not suitable for the construction since supporting ground is not good enough, but C only gave a price for the construction of a specific and existing design, so if C was wrong about quantities or cost at the time of survey, it is C’s mistake; but if foundations need to be different due to technical reasons, then mistake is not related to quantities or costs, but design performed by A.  In the same circumstances, but A asking to bidders to verify soil conditions and propose a suitable solution into their price; the situation changes, because in this case C has to include into its price the ground risk.  On the other hand, if A has the construction place and requirements but not a design, then A can call for a turn-key contract and in this case: design, construction and related risk belong to C; C has to evaluate all circumstances about design and construction, including ground condition.

About mutual mistake, my understanding is that “per-se” a fixed-price contract not necessarily assigns any sort of risks to contractor, and situation needs to be verified in accordance with details of the scope of work.  In the case I mentioned, in the first scenario, if both parties had the mistake of assuming that the design was suitable for construction but finally it was not, due to soil conditions, then a mutual mistake could be considered; but for the second (also fixed-price) or third (turnkey) scenarios, mutual mistake is not applicable since risk is assigned to the contractor.