Legal Definitions - bilateral mistake

Bilateral mistake is a situation in which both parties to a contract make the same mistake. This can happen when they misunderstand each other's intentions or when they have a belief that does not correspond to the facts or law. As a result, the contract may be voidable.

For example, if two people agree to buy and sell a car, but they both mistakenly believe that the car has a working engine, when in fact it does not, this is a bilateral mistake. The contract may be voidable because both parties were mistaken about a material fact that was essential to the agreement.

Another example of bilateral mistake is when two parties agree to a contract, but they have different understandings of a key term. For instance, if a buyer and seller agree to a sale of "widgets," but the buyer believes that the term refers to a specific type of widget, while the seller believes it refers to a different type, this is a bilateral mistake. The contract may be voidable because both parties were mistaken about the meaning of a material term.