Mistake
Article 54
Either party has the right to request a people's court or an arbitration institution to alter
or rescind any of the following contracts:
1. any contract which is made under substantial misunderstanding; or
2. any contract the making of which lacks fairness.
Where a party makes the other party enter into a contract against its true will by means
of deceit, coercion or taking advantage of its difficulties, the injured party has the right
to request a people's court or an arbitration institution to alter or rescind the contract.
Where the request of the party is an alteration to the contract, the people's court or
arbitration institution shall not rescind it.
Article 4.102 (ex art. 6.102) - Initial Impossibility 209
A contract is not invalid merely because at the time it was concluded performance of the
obligation assumed was impossible, or because a party was not entitled to dispose of the
assets to which the contract relates. 210
Article 4.103 (ex art. 6.103) - Mistake as to facts or law 211
(1) A party may avoid a contract for mistake of fact or law existing when the contract
was concluded if: 212
(a) (i) the mistake was caused by information given by the other party; or
213
(ii) the other party knew or ought to have known of the mistake and it
was contrary to good faith and fair dealing to leave the mistaken party
in error; or 214
(iii) the other party made the same mistake, and 215
(b) the other party knew or ought to have known that the mistaken party, had it
known the truth, would not have entered the contract or would have done so
only on fundamentally different terms. 216
(2) However a party may not avoid the contract if: 217
(a) in the circumstances its mistake was inexcusable, or 218
(b) the risk of the mistake was assumed, or in the circumstances should be borne,
by it. 219
Article 4.104 (ex art. 6.104) - Inaccuracy in communication 220
An inaccuracy in the expression or transmission of a statement is to be treated as a
mistake of the person who made or sent the statement and Article 4.103 applies. 221
Article 4.105 (ex art. 6.105) - Adaptation of contract 222
(1) If a party is entitled to avoid the contract for mistake but the other party indicates that it
is willing to perform, or actually does perform, the contract as it was understood by the
party entitled to avoid it, the contract is to be treated as if it had been concluded as the
that party understood it. The other party must indicate its willingness to perform, or
render such performance, promptly after being informed of the manner in which the
party entitled to avoid it understood the contract and before
(2) After such indication or performance the right to avoid is lost and any earlier notice of
avoidance is ineffective. 224 that party acts in reliance on any notice of avoidance. 223
(3) Where both parties have made the same mistake, the court may at the request of either
party bring the contract into accordance with what might reasonably have been agreed
had the mistake not occurred. 225
Article 4.106 (ex art. 6.106) - Incorrect information 226
A party who has concluded a contract relying on incorrect information given it by the
other party may recover damages in accordance with Article 4.117(2) and (3) even if the
information does not give rise to a right to avoid the contract on the ground of mistake
under Article 4.103, unless the party who gave the information had reason to believe that
the information was correct. 227
§20 Effect of Misunderstanding
§20 Effect of Misunderstanding
(1) There is no manifestation of mutual assent to an exchange if the parties attach materially
different meanings to their manifestations and
(a) neither party knows or has reason to know the meaning attached by the other;
or
(b) each party knows or each party has reason to know the meaning attached by
the other.
(2) The manifestations of the parties are operative in accordance with the meaning
attached to them by one of the parties if
(a) that party does not know of any different meaning attached by the other, and
the other knows the meaning attached by the first party; or
(b) that party has no reason to know of any different meaning attached by the
other, and the other has reason to know the meaning attached by the first
party.
§ 151 Mistake Defined
A mistake is a belief that is not in accord with the facts.
§ 152 When Mistake of Both Parties Makes a Contract Voidable
(1) Where a mistake of both parties at the time a contract was made as to a basic
assumption on which the contract was made has a material effect on the agreed
exchange of performances, the contract is voidable by the adversely affected party
unless he bears the risk of the mistake under the rule stated in § 154.
(2) In determining whether the mistake has a material effect on the agreed exchange of
performances, account is taken of any relief by way of reformation, restitution, or
otherwise.
§ 153 When Mistake of One Party Makes a Contract Voidable
Where a mistake of one party at the time a contract was made as to a basic assumption
on which he made the contract has a material effect on the agreed exchange of
performances that is adverse to him, the contract is voidable by him if he does not bear
the risk of the mistake under the rule stated in§ 154, and
(a) the effect of the mistake is such that enforcement of the contract would be
unconscionable, or
(b) the other party had reason to know of the mistake or his fault caused the
mistake
§ 154 When a Party Bears the Risk of a Mistake
A party bears the risk of a mistake when
(a) the risk is allocated to him by agreement of the parties, or
(b) he is aware, at the time the contract is made, that he has only limited
knowledge with respect to the facts to which the mistake relates but treats his
limited knowledge as sufficient, or
(c) the risk is allocated to him by the court on the ground that it is reasonable in
the circumstances to do so.
§ 155 When Mistake of Both Parties as to Written Expression Justifies Reformation
§ 155 When Mistake of Both Parties as to Written Expression Justifies Reformation
Where a writing that evidences or embodies an agreement in whole or in part fails to
express the agreement because of a mistake of both parties as to the contents or effect of
the writing, the court may at the request of a party reform the writing to express the
agreement, except to the extent that rights of third parties such as good faith purchasers
for value will be unfairly affected.
§ 156 Mistake as to Contract Within the Statute of Frauds
§ 156 Mistake as to Contract Within the Statute of Frauds
If reformation of a writing is otherwise appropriate, it is not precluded by the fact that
the contract is within the Statute of Frauds.
§ 157 Effect of Fault of Party Seeking Relief
§ 157 Effect of Fault of Party Seeking Relief
A mistaken party's fault in failing to know or discover the facts before making the
contract does not bar him from avoidance or reformation under the rules stated in this
Chapter, unless his fault amounts to a failure to act in good faith and in accordance with
reasonable standards of fair dealing.
§ 158 Relief Including Restitution
§ 158 Relief Including Restitution
§ 158 Relief Including Restitution
(1) In any case governed by the rules stated in this Chapter, either party may have a claim
for relief including restitution under the rules stated in §§ 240 and 376.
(2) In any case governed by the rules stated in this Chapter, if those rules together with the
rules stated in Chapter 16 will not avoid injustice, the court may grant relief on such
terms as justice requires including protection of the parties' reliance interests.
[Chapter 6 – Mistake]
§ 266 Existing Impracticability or Frustration
(1) Where, at the time a contract is made, a party's performance under it is impracticable
without his fault because of a fact of which he has no reason to know and the non-
existence of which is a basic assumption on which the contract is made, no duty to
render that performance arises, unless the language or circumstances indicate the
contrary.
(2) Where, at the time a contract is made, a party's principal purpose is substantially
frustrated without his fault by a fact of which he has no reason to know and the
non-existence of which is a basic assumption on which the contract is made, no duty of
that party to render performance arises, unless the language or circumstances indicate
the contrary.
Article 178. Invalidity of Transaction Concluded under Influence of Delusion
1. A transaction concluded under the influence of delusion having material significance
may be deemed by a court to be invalid upon the suit of the party which acted under the
influence of delusion.
Delusion as to the nature of a transaction, the identity, or such qualities of its subject
which considerably reduce the possibility of using it for its purpose shall have material
significance. Delusion as to the motives of a transaction shall not have material
significance.
2. If a transaction is deemed to be invalid as concluded under the influence of delusion, the
rules provided for by Article 167(2) of this Code shall apply respectively.
In addition, the party upon whose suit the transaction was deemed to be invalid shall
have the right to demand from the other party compensation for real damage caused to it
if it is proved that the delusion arose through the fault of the other party. If it not proved,
the party at whose suit the transaction was deemed to be invalid shall be obliged to
compensate the other party at its demand for real damage caused to it even if the
delusion arose through circumstances beyond the control of the deluded party.