An economic perspective on the doctrine of unilateral mistake in English contract law: a remedy-based approach

Abstract

The key economic issues in implementing the law of unilateral mistake are twofold. First, it should avoid misallocation of resources; second, it ought to create a sufficient incentive for acquisition of information. However, the rule of unilateral mistake in English contract law does not serve these economic goals satisfactorily. The existing law and economics literature deals extensively with how to achieve these ends by designing the legal standards for a unilateral mistake which can nullify the contract, with little discussion of the function of legal remedy. This paper offers a remedy-based approach and argues that it has economic advantages over the current law.