Also known as: mistakes in basic assumptions · fundamental mistake · mistake of fact
Written by attorneys · grounded in primary & secondary sources — see below
A mutual error by contracting parties about a fact that constitutes a basic assumption on which the agreement rests. The mistake must materially affect the agreed exchange of performances. The adversely affected party must not bear the risk of the mistake under the circumstances.
Select any source to read its text and confirm it supports the definition.
Maya Malik confronts an intruder she believes is unlawfully entering her home. She uses force to repel the person. The intruder turns out to hold a privilege to enter based on a court order that Maya did not cause or know about. Because Maya's mistake about the basic assumption of unlawful entry was reasonable and not her fault, she retains the privilege to defend herself.
Michelle Murphy executes a will leaving her donor-advised account at Helping Hands to a charity. Both she and her attorney believed only one account existed. Clear and convincing evidence later shows she maintained a second account under a different email and always treated both as a single charitable resource. The court reforms the will to include the second account to match her actual intention.
Ming Ma creates a trust that inadvertently omits a parcel of land both she and her attorney assumed was already included. Clear and convincing evidence establishes that the omission resulted from a mistake of fact about the trust's coverage. The court reforms the trust terms to add the parcel and conform to Ma's proven intention.
Malcolm McKinley sells what both parties believe is a fertile breeding cow to Meredith Maxwell for a high price. After the sale, the cow is discovered to be barren. The mutual mistake about the cow's reproductive capacity was a basic assumption of the bargain and materially alters the exchange, so Maxwell may rescind.
Momentum Capital and Mercury Industries enter a long-term supply contract with a price escalation clause both believed would track actual production costs. Unexpected market shifts cause the formula to produce prices far from the parties' shared expectation. The mutual mistake about the formula's performance as a basic assumption allows reformation or rescission of the pricing term.
Three elements are required. Both parties must be mistaken about a fact that constitutes a basic assumption of the bargain. The mistake must have a material effect on the agreed exchange. The party seeking avoidance must not bear the risk of the mistake.
A mistake about the authenticity or fundamental quality of the subject matter qualifies as a mistake in basic assumptions. A later change in market value or an erroneous prediction about future conditions does not.
…time the contract is made, but must have been known to one or both of the parties. Where there is no warranty, there can be no mistake of fact when no such fact exists, or, if in existence, neither party knew of it, or could know of it; and that is precisely this case. If the owner of a Hambletonian horse had speeded him, and was…
…parties with respect to the use of the WPI have been completely and totally frustrated, that both ALCOA and Essex made a mutual
…instance. I think, however, that it was originally a mistake. What principally weighs with me in thinking that Lord Coke made a
…As to mistake, the amended complaint fails to disclose any
…Palpable and Impalpable Mistake in Construction Contracts [1931] 16 Minn.L.Rev. 137, 143-147.) Rescission may be had for
Yes. When one party knows the other is mistaken about a basic assumption and silence violates good faith and fair dealing, nondisclosure equates to a misrepresentation that permits avoidance.
No. A writing alone does not shift the risk. Risk allocation requires an express agreement, conscious assumption of uncertainty, or circumstances making it reasonable to place the risk on that party.
Reformation is available when clear and convincing evidence shows that a mistake of fact or law affected specific terms and reveals the donor's true intention, even if the document is unambiguous.