Restatement (Second) of Contracts · Section § 153
Overview of the legal principles concerning contracts entered into under a mistaken belief.
Source: Restatement Restatement (Second) of Contracts § § 153
Where a mistake of both parties at the time a contract was made as to a material fact that is not caused by the fault of either party makes a contract voidable in equity, the contract is voidable by the adversely affected party.
If both parties to a contract share a mutual mistake about a significant fact, and neither was at fault, the affected party can choose to void the contract. This allows for fairness in contracts made under mistaken beliefs.
The mistake must concern a material fact that affects the essence of the contract.
Both parties must share the same misunderstanding for the contract to be voidable.
Illustration 1
Two parties agree to sell and buy a specific painting, both believing it to be an original. If it turns out to be a forgery, the contract may be voidable due to mutual mistake.
Illustration 2
A buyer contracts to purchase land that both parties believe has access to a public road, but later finds out it does not. The buyer may void the contract.
In this case, the court ruled that a sale of a cow based on both parties' belief it was sterile was voidable when it was discovered she was pregnant.
Understanding § 153 is vital for legal professionals dealing with contract disputes and negotiations, as it provides a remedy for parties misled by mutual mistakes. It encourages careful consideration of material facts before forming contractual agreements.