Legal Definitions - mutual mistake

A mutual mistake occurs in contract law when both parties to an agreement share the same fundamental misunderstanding about a crucial fact that is central to their contract. This shared error must be so significant that it affects the very essence of what they intended to agree upon. If a mutual mistake is proven, a court may determine that there was no true "meeting of the minds" on a critical element, potentially allowing the contract to be canceled or reformed.

Here are some examples illustrating a mutual mistake:

• Example 1: Mistaken Identity of an Item

  A collector agrees to purchase a rare antique vase from a seller. Both the collector and the seller genuinely believe the vase is a genuine Ming Dynasty artifact, which would make it extremely valuable. After the sale is complete, an expert appraisal reveals that the vase is actually a skillful replica created in the early 20th century, worth significantly less. Neither party had any intention to deceive; they both simply shared the same incorrect belief about the vase's origin and authenticity.

  This illustrates a mutual mistake because both the buyer and the seller were mistaken about a fundamental characteristic—the authenticity and historical period—of the item being sold, which was central to its value and the reason for the contract.

• Example 2: Mistaken Existence of Subject Matter

  A fishing company enters into a contract to buy a specific fishing vessel from a boat owner. Unbeknownst to both the company and the owner, the vessel had sunk in a sudden, severe storm the day before the contract was signed. Neither party had any knowledge of the incident at the time of the agreement.

  This is a mutual mistake because both parties based their contract on the mistaken belief that the subject matter of the agreement—the fishing vessel—still existed. The non-existence of the vessel makes the contract impossible to perform and fundamentally different from what was intended.

• Example 3: Mistaken Location of Property

  A developer agrees to purchase a parcel of land from a landowner, believing it to be a specific plot with direct access to a main highway. The landowner also believes they are selling that same highway-accessible plot. However, due to an outdated map used by both parties, the legal description in the contract actually refers to a different, landlocked parcel several miles away, which has significantly less value and is unsuitable for the developer's intended project.

  This demonstrates a mutual mistake because both the buyer and the seller shared the same misunderstanding about the identity and key characteristics (location and access) of the specific piece of land being bought and sold. Their shared error about the subject matter's true nature and location is fundamental to the agreement.