Also known as: bilateral mistakes · mutual mistake
Written by attorneys · grounded in primary & secondary sources — see below
A shared erroneous belief by both parties to a contract about a basic assumption on which the contract is made that has a material effect on the agreed exchange of performances. The adversely affected party may avoid the contract unless that party bears the risk of the mistake.
Bernard Bass sold land to Bella Barnes under a contract requiring post-closing repairs. Both believed the zoning permitted the buyer's intended use. After Bella accepted the deed at closing, the parties discovered the shared zoning error that eliminated the property's value. Bella may still sue despite merger because the mutual mistake supplies an exception.
Bradley Banks contracted to buy a building from Bharat Bhatia with an oral side promise to build a boundary fence after closing. Both parties mistakenly believed the fence obligation would remain enforceable. After deed acceptance the fence was never built. The mutual mistake prevents merger from discharging the independent promise.
Select any source to read its text and confirm it supports the definition.
Bobby Brady sold a cow to Belinda Baxter for beef price after both inspected it and concluded it could not breed. The cow was in fact pregnant and worth far more as a breeder. The shared mistake went to the substance of the animal sold. Belinda may rescind the sale.
Boulder Construction agreed to supply materials to Benson Motors under a long-term contract whose price formula both parties assumed would track actual production costs. Unforeseen energy spikes made the formula grossly inaccurate and unprofitable. The mutual mistake about the formula's suitability permits reformation of the price term.
Bay Area Systems sold a commercial building to Boreal Energy. Both parties assumed existing zoning allowed short-term rentals that justified the price. A recent overlooked amendment banned the use. The mutual mistake about the legal status of the property permits Boreal to avoid the contract.
Bernard Bass contracted to buy a harvest from Bella Barnes. Both believed the field contained non-GMO wheat required for a specialty contract. Testing later showed GMO grain that the buyer could not use. The shared mistake about the crop's genetic identity allows avoidance.
Both parties must be mistaken about a basic assumption on which the contract was made. The mistake must materially affect the agreed exchange. The adversely affected party must not bear the risk of the mistake.
No. Courts distinguish mistakes about existing facts from erroneous predictions about future conditions. A shared error about an existing legal restriction or physical characteristic can support avoidance while a mistaken forecast about profitability does not.
Merger does not bar such claims. An exception preserves actions grounded in mutual mistake even after the buyer accepts the deed. The court examines whether the mistake concerned a basic assumption material to the transaction.
Yes when each party knows the other attaches a different meaning to the term. In that situation there is no mutual assent on the essential obligation and no contract forms on that term.
…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…