Also known as: material mutual 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 was 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.
Mina Mehta sold land to Matrix Technologies under a contract that both parties believed included an adjacent strip shown on an old survey. After closing the deed omitted any reference to the strip. When a new survey revealed the strip belonged to a neighbor, Matrix sought to rescind. The mutual mistake about the parcel's boundaries permitted the claim to proceed despite merger of the contract into the deed.
Mariam Mansour contracted to sell an artwork to Mirage Hotels after both reviewed provenance documents stating the piece was by a famous artist. Post-sale expert analysis showed a student created the work. Mirage sought reformation. The mutual mistake about authorship allowed the claim to avoid the ordinary bar of merger because the error concerned a basic assumption central to the exchange.
Select any source to read its text and confirm it supports the definition.
A mistake exists when a party holds a belief that is not in accord with the facts. Both parties in the boundary survey and provenance examples held the same incorrect belief about an existing fact at the time of contracting, satisfying the definition even without fraud or bad faith.
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Yes. Merger ordinarily discharges contractual promises not embodied in the deed, but mutual mistake is an express exception that allows the adversely affected party to pursue rescission or reformation despite acceptance of the deed.
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The party must demonstrate that both sides shared the same erroneous belief about the contents or effect of the writing and that reformation would restore the agreement actually reached without unfairly affecting third parties.
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