In contract law, a mutual material mistake refers to a situation where both parties to a contract had the same mistaken or erroneous belief about something in a contract that concern one or more basic assumptions on which the contract was made. In order to use the defense of mutual material mistake, as stipulated in Restatement Second of Contracts § 152, a party must prove that:
- There was a material mistake, meaning that it must concern one or more basic assumptions on which the contract was made;
- The party was adversely-affected by the mistake;
- The mistake was mutual, meaning both parties had the same mistaken belief; and
- The adversely-affected party does not bear the risk of the mistake (i.e. there is no assumption of risk) under the rule stated in Restatement Second of Contracts § 154.
[Last updated in July of 2023 by the Wex Definitions Team]
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