Which contract defense involves a mistaken belief about a material fact at the time of contract formation?

Which contract defense involves a mistaken belief about a material fact at the time of contract formation?

• A. Incapacity
• B. Duress
• C. Mistake
• D. Misrepresentation

Answer: (C)

Mistake is a contract defense that covers entering into an agreement based on a belief about a material fact that turned out to be wrong. A material fact is something that would significantly affect the decision to contract. If both sides share that mistaken belief about a basic fact, it’s a mutual mistake, and the contract is typically voidable if the mistake goes to the heart of the agreement and the mistaken party didn’t bear the risk. If only one party is mistaken, relief may exist only if the other party knew of the error, caused it, or the risk was allocated to the mistaken party; otherwise, the contract usually remains enforceable. This differs from incapacity (lacked legal ability to contract) and duress (coercion), and from misrepresentation (a false statement by one party).

Mistake is a contract defense that covers entering into an agreement based on a belief about a material fact that turned out to be wrong. A material fact is something that would significantly affect the decision to contract. If both sides share that mistaken belief about a basic fact, it’s a mutual mistake, and the contract is typically voidable if the mistake goes to the heart of the agreement and the mistaken party didn’t bear the risk. If only one party is mistaken, relief may exist only if the other party knew of the error, caused it, or the risk was allocated to the mistaken party; otherwise, the contract usually remains enforceable. This differs from incapacity (lacked legal ability to contract) and duress (coercion), and from misrepresentation (a false statement by one party).