Ask a lawyer: Is a mistake in an employment contract binding?

by Lucy Hook25 Aug 2016

"Even if there is a mistake in the employment contract, the parties are generally legally bound by the terms of that contract," Shaun Lee, supervising associate at JWS Asia Law Corporation, told HRD.

However, if the employee knows or must have known that there has been a error in the employment agreement, then the employee is generally not entitled to take advantage of the error against the employer, Lee explained.

Where there has been a one-sided error - where one party is mistaken about a term of the contract, and the other party is aware that the first party is operating under a mistake - the party which has made the mistake can either say that the whole contract is unenforceable or seek the court’s help in rectifying the error, he said.

The contract can only be deemed unenforceable if the mistake is fundamental in the sense that it is a serious error, Lee said; For example, if it involved a ten-fold increase in the employee’s salary.

However, if the employer accidentally provides for an extra day of paid vacation leave, that error may not be sufficiently serious to warrant voiding the entire employment contract, he explained.

The first approach has very serious legal implications as it means that the employment contract is void and entirely unenforceable - meaning that in the absence of an amicable resolution, the parties would have to enter into a new contract altogether.

An alternative solution, in cases where the parties are unable to mutually resolve the error, is 'rectifying' the error - which preserves the contract but does require the mistaken party to commence court proceedings, Lee said.

However, to obtain rectification, the mistaken party must be able to demonstrate to the court that the erroneous term does not reflect the parties’ true intentions and agreement - and this has a very high threshold of proof.

Ultimately, Lee said, disputes about mistaken terms are all very fact sensitive and the outcome would depend very heavily on a number of factors, such as the extent and severity of the mistake, and whether either part did or should have recognised that there was a mistake. 

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