In law, a misunderstanding or erroneous belief about a matter of fact (mistake of fact) or a matter of law (mistake of law). In civil cases, mistake is particularly important in the law of contract. Mistakes of law have no effect on the validity of agreements, and neither do many mistakes of fact. When a mistake of fact does do so, it may render the agreement void under common-law rules (in which case it is referred to as an operative mistake) or it may make it voidable, i.e. liable, subject to certain limitations, to be set aside under the more lenient rules of equity.
When both parties to an agreement are under a misunderstanding, the mistake may be classified as either a common mistake (i.e. a single mistake shared by both) or a mutual mistake (i.e. each misunderstanding the other). In the case of common mistake, the mistake renders the contract void only if it robs it of all substance. The principal (and almost the only) example is when the subject matter of the contract has, unknown to both parties, ceased to exist. A common mistake about some particular attribute of the subject matter (e.g. that it is an original, not a copy) is not an operative mistake. However, a common mistake relating to any really fundamental matter will render a contract voidable. In the case of mutual mistake, the contract is valid if only one interpretation of what was agreed can be deduced from the parties' words and conduct. Otherwise, the mistake is operative and the contract void. When only one party to a contract is under a misunderstanding, the mistake may be called a unilateral mistake and it makes the contract void if it relates to the fundamental nature of the offer and the other party knew or ought to have known of it. Otherwise, the contract is valid so far as the law of mistake is concerned, though the circumstances may be such as to make it voidable for misrepresentation.
A deed or other signed document (whether or not constituting a contract) that does not correctly record what both parties intended may be rectified by the courts. When one signatory to a document was fundamentally (but not carelessly) mistaken as to the character or effect of the transaction it embodies, the signatory may plead the mistake as a defence to any action based on the document.
Subjects: Law — Business and Management.