Also known as: mutual mistakes of material facts · mutual mistake · mutual mistake of fact
Written by attorneys · grounded in primary & secondary sources — see below
A doctrine under which a contract is voidable by the adversely affected party when both parties at the time of contracting share a belief about an existing fact that is not in accord with reality and that belief concerns a basic assumption materially affecting the agreed exchange of performances.
Select any source to read its text and confirm it supports the definition.
Maria Morales sold land to Michael Miller under a contract describing the parcel by an old survey that both believed included an adjacent strip. At closing Miller accepted a deed silent on the strip. After closing a new survey revealed the strip belonged to a neighbor. Miller sued for rescission. The mutual mistake about the boundary allowed the claim to proceed despite merger of the contract into the deed.
Michelle Murphy sold an office building to Miguel Mendoza. Both parties believed the purchase agreement's promise to install fiber after closing would survive the deed. The deed contained no such term. After closing Murphy refused to install the network. Mendoza sought enforcement. The mutual mistake about whether the promise merged permitted the claim to avoid discharge under merger doctrine.
Mina Mehta sold a cow to Ming Ma. Both believed the animal was infertile and priced it for beef. The cow was in fact pregnant and far more valuable as a breeder. Ma discovered the pregnancy after purchase and sought rescission. The shared mistake about the cow's fertility went to the substance of the bargain and rendered the contract voidable.
Millennium Media contracted to supply aluminum to Maxwell Manufacturing under a long-term agreement using a Wholesale Price Index formula both parties assumed would track production costs. Unforeseen electricity cost spikes caused the formula to underprice performance by millions. Maxwell sought reformation. The mutual mistake about the formula's suitability justified equitable relief reforming the price term.
Matrix Technologies and Marathon Logistics signed a services contract both believed contained only a bilateral arbitration clause. Drafting error inserted a class-action waiver neither noticed. After a dispute arose Marathon sought to pursue a class claim. The mutual mistake about the clause's contents supported reformation to match the parties' actual agreement.
A mistake exists when a party's belief about an existing fact does not match reality. Both the museum and Nora believed the painting was an original by the famous artist, but expert analysis later showed a student created it. Their shared incorrect belief therefore qualified as a mistake because it was not in accord with the facts at the time of contracting.
Supporting sources
No. Mistake doctrine focuses solely on whether the shared belief aligns with reality. Nora and Sam both relied on an outdated survey showing a boundary strip as part of the property when a new survey proved it belonged to a neighbor. Their innocent shared misunderstanding still constituted mutual mistake even without any deception.
…holding, and I think the circuit judge was right in his construction of the contract between the parties. It is claimed that a mutual mistake of a material fact was made by the parties when the contract of sale was made. There was no warranty in the case of the quality of the animal. When a mistaken fact is relied upon as ground for rescinding,…
…of the parties with respect to the use of the WPI have been completely and totally frustrated, that both ALCOA and Essex made a
…intended something else than the usual meaning which the law imposes upon them, he would still be held, unless there were some mutual mistake
…the alleged contract. Texaco further asserts that the alleged contract was not valid and enforceable, because it was based on a mutual mistake
…it attempted to accept the bid, and knowledge by one party that the other is acting under mistake
Supporting sources
Reformation is available when both parties intended a particular term but the writing fails to express that intention because of a drafting error both overlooked. Green Broadcast and Republic Digital both believed their syndication agreement granted non-exclusive rights, yet an exclusivity clause remained through inadvertence. The mutual mistake about the writing's contents justified reformation to reflect the actual bargain.
Mutual mistake concerns a shared erroneous belief about an existing fact. Misunderstanding arises when each party attaches a different meaning to a term and knows the other does so. Internal emails showed Mountain Learning and the City of Roswell each knew the other gave materially different meanings to intensive yet signed anyway, producing no contract on that term rather than a voidable agreement under mistake doctrine.