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.
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.
