Legal Definitions - essential mistake

An essential mistake in contract law refers to a significant error made by one or both parties concerning a fundamental aspect of an agreement. This type of mistake is so central to the contract that, had the parties known the truth, they would not have entered into the agreement. It prevents a genuine "meeting of the minds" (also known as consensus ad idem) and can, in certain circumstances, allow a contract to be canceled or declared invalid.

Here are some examples illustrating an essential mistake:

• Mistake Regarding the Identity of the Subject Matter: Imagine a collector visits an antique shop and agrees to purchase "the silver locket" displayed in a specific case, believing it to be a rare 18th-century piece. The shop owner, however, is thinking of a different, modern silver locket in the same case and agrees to sell it at a price appropriate for the modern item. If the collector's intention was solely to acquire the rare 18th-century locket, and the shop owner was unaware of this specific belief, there is an essential mistake regarding the identity of the specific item being transacted. The parties were not agreeing on the same object.

• Mistake Regarding a Fundamental Quality or Nature: Consider a company that contracts to buy a large quantity of raw materials, specifically described as "grade A industrial steel," for manufacturing high-stress components. Both parties understand that the steel's strength and purity are critical for this purpose. After delivery, it is discovered that the steel is actually a lower grade, unsuitable for high-stress applications. If the quality of the steel was a known, fundamental condition of the purchase, the company's mistake about the material's suitability for its intended, communicated purpose would be an essential mistake, as the very nature of what was being bought was fundamentally different from what was agreed upon.

• Mistake Regarding the Identity of a Party (where identity is crucial): A client commissions a portrait from "Artist A," a renowned painter known for their unique impressionistic style, specifically seeking their distinctive artistic vision. Due to an administrative error by an agent, the contract is mistakenly drawn up and signed with "Artist B," who has a similar name but a completely different, traditional style. If the client's intention was exclusively to contract with Artist A, and Artist A's specific artistic skill and reputation were the essential reasons for the commission, then the mistake about the identity of the contracting party would be an essential mistake. The client did not get the specific individual whose services they intended to secure.