Contract Mutual Mistake

A Contract Mutual Mistake is a contract agreement mistake where both parties to a contract share an erroneous belief about a fundamental fact, potentially rendering the contract voidable.

• AKA: Mutual Agreement Mistake, Mutual Material Mistake, Contract Bilateral Mistake.
• Context:
  • It can occur when both parties misunderstand a material fact that is central to the agreement.
  • It can occur when both parties have a shared incorrect belief about a vital aspect of the contract.
  • It can render the contract voidable, as there is no genuine meeting of the minds.
  • It can lead to the contract being voided if the mistake significantly impacts the agreement's purpose or terms.
  • It can involve errors in subject matter, identity, or essential terms of the contract.
  • It can be remedied through rescission or reformation of the contract to reflect the parties' original intent.
  • It can require proof that the mistake was mutual and not caused by negligence.
  • ...
• Example(s):
  • Mistake as to Subject Matter: Both parties believe a painting is an original work, but it is later discovered to be a replica.
  • Mistake as to Terms: Both parties agree on a delivery date but mistakenly record a different one in the contract.
  • The case of Raffles v Wichelhaus, where both parties were mistaken about which ship named "Peerless" was to carry the goods, leading to a mutual misunderstanding.
  • A contract where both parties believe a specific item exists, but it had been destroyed prior to the agreement.
  • ...
• Counter-Example(s):
  • Unilateral Mistake, where only one party is mistaken about a material fact.
  • Misrepresentation, which involves false statements rather than shared errors.
  • Non-Agreement Mistake, which occurs when parties form a valid agreement but seek to nullify it due to a mistake regarding its terms or subject.
  • ...
• See: Mutual Assent, Contractual Mutuality, Contract Mutual Consent, Mistake of Law, Mistake of Fact, Legal Agreement Capacity, Contract Rescission, Contract Reformation.

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References

2025

• (LawTeacher.net, 2025) ⇒ LawTeacher.net. (2025). "Mistake in Contract Law". In: LawTeacher.net.
  • QUOTE: An agreement mistake is one in which a fundamental mistake has been made relating to the terms of the contract that prevent the formation of a legally binding contract. This is often referred to as an ‘offer and acceptance’ mistake. The parties will subjectively believe they have formed a legally binding contract, but in reality, they have not done so. This first examination of agreement mistake will concentrate on mutual agreement mistake, where both of the parties to the contract hold this belief.

    An example of a mutual mistake can be found in Raffles v Wichelhaus (1864) 2 Hurl & C 906, where a contract was made for the purchase of some cotton which would be delivered by a ship named ‘Peerless’ that sailed from Bombay. However, there were two ships named ‘Peerless’ that sailed from Bombay, one in October and one in December. One party believed the contract was for the delivery in October, and the other party believed it was a contract for the delivery in December. Therefore, as per offer and acceptance rules, there was no mirror agreement due to this mistake. This was a reasonable mistake to make, therefore the contract was void for mistake.

2023

• (LII, 2023) ⇒ Wex Definitions Team (2023). "mutual material mistake". In: Wex, Legal Information Institute, Cornell Law School.
  • QUOTE: In contract law, a mutual material mistake refers to a situation where both parties to a contract had the same mistaken or erroneous belief about something in a contract that concerns one or more basic assumptions on which the contract was made. In order to use the defense of mutual material mistake, as stipulated in Restatement (Second) of Contracts § 152, a party must prove that:
    • There was a material mistake, meaning that it must concern one or more basic assumptions on which the contract was made;
    • The party was adversely affected by the mistake;
    • The mistake was mutual, meaning both parties had the same mistaken belief; and
    • The adversely affected party does not bear the risk of mistake (i.e., there is no assumption of risk) under the rule stated in Restatement (Second) of Contracts § 154.

2022

• (Cueto, 2022) ⇒ Santiago A. Ceuto (2022). "Mutual, Common & Unilateral Mistake In Contract Law (With Examples)". In: Legal Department Solutions, Ceuto Law Group, P.L.
  • QUOTE: Our mutual mistake definition: A mutual mistake is a mistake with cross-purposes made by both parties in a contract.

    If both parties enter into an agreement but are equally mistaken about the same contract terms, it is considered a mutual mistake. The most famous case of mutual mistake is Raffles v Wichelhaus, which demonstrated the rule of the Peerless.

    As a general rule, what makes a mutual mistake different from a common mistake—which will be covered next—is that the mistakes contradict each other directly.

    Mutual mistake contract law cases usually end in voiding the contract so that it can be renegotiated in a way where both parties agree on the terms and conditions of the contract.

    • Mutual Mistake Example
      • An example of mutual mistake contracts is contracts with obscure language that leads both parties to come to different conclusions. Like in the case of a beef farmer who sells a store fresh beef. If the type of beef is not specified in the contract, the farmer might provide chuck meat while the store was expecting rib meat.

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