Also known as:mutual misapprehensions · mutual mistake · mutual misunderstanding
Written by attorneys · grounded in primary & secondary sources — see below
A shared erroneous belief by both parties to a contract about a basic fact existing at the time of formation. The belief must concern a fundamental assumption underlying the bargain rather than a prediction about future events or a matter of value or quality.
Sources & Authorities
How it applies
Common Examples
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Merger Exception for Shared Boundary Error
Mason McCarthy sold land to Melanie Morris under a contract that described the parcel as including an adjacent strip shown on an old survey. Both parties believed the strip belonged to the seller. After closing the deed omitted any reference to the strip. When a new survey revealed the strip belonged to a neighbor, the buyer sought to rescind. The court permitted the claim because the parties shared a mutual misapprehension about an existing boundary fact that survived merger.
Collateral Promise Survives Despite Merger
Meridian Motors sold a building to Millennium Media. The contract promised post-closing installation of fiber optic lines on adjacent land the seller retained. The deed contained no such promise. After closing the buyer discovered the seller never intended to perform. Because the parties shared the misapprehension that the promise was independent of title transfer, the court allowed enforcement of the collateral undertaking despite merger.
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Cases
Common Law
Restatements
Casebooks
Barren Cow Rescission
Matthew Martinez sold a cow to Maria Morales. Both believed the animal was infertile and priced the sale accordingly. After the transfer the cow gave birth, revealing it had been pregnant at the time of sale. The seller sought to avoid the contract. The court held the shared misapprehension went to the substance of the thing sold and permitted rescission.
Sherwood v. Walker66 Mich. 568, 580, 33 N.W 919 (1887)
Pricing Formula Reformation
Midwest Airlines contracted with Morgan Financial for long-term aluminum supply using a price formula both parties believed would track production costs. Unforeseen electricity spikes rendered the formula grossly inaccurate. The supplier sought reformation. The court found a mutual misapprehension about the formula's suitability for measuring costs and reformed the price term to restore the intended bargain.
Aluminum Company of America v. Essex Group, Inc.499 F. Supp. 53 (W.D. Pa. 1980)
Unilateral Pricing Error Not Mutual
A car dealer’s internal computer miscalculation understated the offered sale price by $2,000. The buyer accepted the quoted price without knowledge of the calculation process or any shared belief about its accuracy. The dealer later claimed mutual misapprehension. The court treated the error as unilateral mistake because the buyer did not share any erroneous belief about an existing fact underlying the bargain.
Common questions
Frequently Asked
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How does mutual misapprehension differ from unilateral mistake?+
Mutual misapprehension requires both parties to share the same erroneous belief about an existing fact. A unilateral mistake occurs when only one party holds the incorrect belief. Courts treat the two doctrines differently for purposes of rescission and reformation.
When does a mutual misapprehension about an existing fact fail to support relief?+
No relief is available if the shared belief concerns a prediction about future events, market conditions, or a matter of value or quality rather than a basic assumption about an existing fact. Courts also deny relief when one party consciously assumed the risk of the error.
Does mutual misapprehension about a writing's contents support reformation?+
Yes. When both parties intend a particular term but the written document fails to reflect that intention because of a shared drafting error, a court may reform the writing to match the actual agreement.
What must the mistaken belief concern to qualify as mutual misapprehension?+
The belief must relate to an existing fact that is a basic assumption of the contract. Predictions about future market conditions or errors in business judgment do not qualify.
66 Mich. 568, 33 N.W. 919 (1887)Contracts
…between them for all purposes of use as there is between an ox and a cow that is capable of breeding and giving milk. If the mutual mistake had simply related to the fact whether she was with calf or not for one season, then it might have been a good sale; but the mistake affected the character of the animal for all time, and…