Federal Unilateral Mistake of Fact and Mutual Mistake Contract Disputes

Contractors can claim mistake of fact in bid claims against the federal government.  When arguing that there was a mistake in bid, a contractor can either raise a mutual mistake of fact (both contractor and government made a mistake in drafting the agreement) or unilateral mistake of fact (contractor mistake) claim.  Both claims are subject to reformation (price adjustments) if successfully proven.

Mutual Mistake of Fact Contract Claims:

When looking at timing to bring a contract law mutual mistake claim, mutual mistake contract claims can be brought after the contract was entered into, but where some error was made in the contract itself.  To be successful in this contract defense, the contractor must prove by clear and convincing evidence:

• Parties to the contract were mistaken in their belief about a fact,
• That mistaken belief constituted a basic assumption underlying the contract,
• The mistake had a material effect on the bargain, and
• The contract did not put the risk of the mistake on the party seeking reformation

Bank of Guam v. United States.  Mutual mistake of fact, in this context, is defined as a belief that is not in accord with the facts.  The contractor must allege that they held an erroneous belief to an existing fact; an erroneous belief about the contents of a written agreement is enough to constitute a contract mutual mistake of fact.  However, if the fact is not known to the contracting parties to exist, then the parties cannot have a belief about that particular fact and no successful argument and claim can be made.  AECOM Govt. Servs.

The mistaken belief must also relate to facts that existed at the time the contract was made.  Predictions or failure to expect future change will not suffice for mutual mistake claims.

Recovery is available, in mutual mistake of fact cases when the parties reached an agreement but failed to express it correctly or fully in writing.  However, a contract remedy is often only available where the government actually received a benefit from the extra work the contractor did.

Contractor Unilateral Mistake of Fact:

Contractors can make a unilateral mistake of fact when submitting their government proposals, and sometimes the mistakes are so severe that the government should have pointed it out to the contractor and if they did not, the contractor could be entitled to post-award contract reformation based on a unilateral mistake.

To show a mistake of fact in the context of a government contract, the contractor must demonstrate by clear and convincing evidence:

• A mistake of fact occurred prior to the contract award,
• Mistake was a clear-cut, clerical or mathematical error or a misreading of the specifications and not a judgment error,
  • The contractor’s unilateral mistake of fact must be either a clear-cut clerical or mathematical error in its quote or that is misread the specifications which resulted in an error in its quote
• Prior to the award, the government knew, or should have known, that a mistake of fact had been made and thus should have requested bid verification,
  • The mistake must have been so clear that the government or contracting officer would have noticed
• Government did not request bid verification or its request for bid verification was inadequate, and
• Proof of the intended bid is established

Int’l Gear Technologies (2014).  A contractor is not precluded from recovery for a unilateral mistake of fact even if the contractor may have been negligent in preparing its bid proposal.

In unilateral mistake of fact cases, reformation will not be granted for more than the amount the contracting officer would have accepted at the time the contract was awarded.  In sealed bid contracts, the amount is limited to that of the next most favorable bid.

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If you think you may have either a mutual mistake contract matters or unilateral mistake contract claim against the federal government, please call a government contracts lawyer for a Free Initial Consultation at 1-866-601-5518.