Legal Updates

An agreement signed as a result of a mutual mistake may still be enforceable

August 8, 2021

Prior to jointly purchasing a building, a tenancy in common agreement was signed, under which one of the parties was granted building rights on the roof and the other was granted building rights in the storage floor. Later it was discovered that the zoning rules do not enable building concurrently on the roof and the storage floor and one need to be chosen only. Thus, neither party agreed to enable the other to build.

The Court held that despite the parties' mutual mistake there was no justification for annulment the tenancy in common agreement and neither party can be forced to agree to the building by the other only. Where a contract is entered into out of a common mistake of both parties, the contract will be annulled only if considerations of justice so justify. Here, a common mistake was made because at the time of concluding the contract both parties believed that the high-rise construction and building in the warehouses area on the ground floor could coexist, when in practice zoning circumstances prevented this. Nevertheless, because the annulment of the agreement will not nullify the purchase of the building there is no justification for its annulment and it is binding.