What is a mutual mistake in contract law?

A mutual mistake occurs when both parties share a false belief about a material fact at the time the contract is formed, potentially making the contract voidable.

Can a mutual mistake cancel a contract?

Yes, if the mistake concerns a basic assumption that materially affects the exchange and neither party assumed the risk, a court may grant rescission to cancel the contract.

What is an example of a mutual mistake?

A classic example is both buyer and seller believing a cow is barren when it is actually pregnant, as in the famous case Sherwood v. Walker, which dramatically changes the animal's value.

Mutual Mistake in Contracts: When Both Sides Get It Wrong

What Is a Mutual Mistake?

A mutual mistake occurs when both parties to a contract share a false belief about a material fact at the time the agreement is formed. Because the contract was based on a shared misunderstanding, it may not reflect what either party actually intended, and courts may allow rescission.

Requirements for Relief

Under the Restatement (Second) of Contracts, a mutual mistake makes a contract voidable if:

Both parties shared the same mistaken belief about a basic assumption underlying the contract
The mistake materially affects the agreed exchange — not just a minor detail
The party seeking relief did not bear the risk of the mistake through the contract terms or circumstances

Classic Examples

Both parties believe a painting is a reproduction when it is actually an original by a famous artist
A land sale where both parties believe the parcel is 10 acres when it is actually 6 acres
Both parties to an insurance contract believe the insured property exists when it has already been destroyed

Risk Allocation

Courts examine whether one party assumed the risk of being wrong. If the contract includes "as-is" language or the buyer had the opportunity to investigate and chose not to, the court may find they bore the risk of any mistakes.

Mutual Mistake vs. Misrepresentation

In a mutual mistake, neither party intentionally misled the other — both genuinely held the same false belief. In misrepresentation, one party affirmatively stated something false that the other relied upon.

Available Remedy

The primary remedy for mutual mistake is rescission — the contract is unwound and both parties are restored to their pre-contract positions. Damages are not typically available because neither party acted wrongfully.

When to Consult a Lawyer

Consider consulting an attorney promptly if you discover that a fundamental assumption underlying your contract was shared but incorrect, as delay may affect your ability to seek rescission.

This article is for informational purposes only and does not constitute legal advice. Consult a licensed attorney for guidance specific to your situation.