Mistake as an element in vitiating securities supporting debts to financial institutions: a confluence of legal and equitable principles
Mistake in contracts of suretyship supporting financial institution debts, like other contracts, has a narrow and technical meaning. There is no general right to be released from such a surety contract because one, or both, of the parties made a mistake or error of judgement. At common law, a court would not set aside a contract merely because a party to that contract later discovers facts, which, if known, would have dissuaded that party from entering into the contract. However, a court of equity will grant, at its discretion, orders refusing specific performance because of mistake, setting aside a surety contract upon appropriate terms and conditions or rectifying the contract if the terms were wrongly recorded.