A unilateral mistake is an incorrect belief of one party that is not shared by the other party. A mutual mistake is an incorrect belief shared by both parties. The conventional wisdom is that the contract is more likely to be voidable if the mistake is mutual, a distinction emphasized by courts for over a century. Although judicial excuse for either unilateral or mutual mistake is relatively rare, courts continue to cite mutual mistake as grounds for avoidance. Law digests continue to list mutual mistake as a separate doctrine with regular new holdings, and the term appears frequently in contract cases.
Informal excuse is also common.
Many stores allow customers to return merchandise even when no promise to do so had earlier been made, and in transactions between businesses, purchasers are often allowed to cancel orders even though this may formally be a breach of contract. When Mistake of Both Parties Make a Contract Voidable Where a mistake of both parties at the time of contract was made as to a basic assumption on which the contract was made has a material effect on the agreed exchange of performances, the contract is voidable by the adversely affected party unless he bears the risk of the mistake under the rule stated in 154. When a Party Bears the Risk of a Mistake A party bears the risk of mistake when the risk is allocated to him by agreement of the parties, or he is aware, at the time the contract is made, that he has only limited knowledge with respect to the facts to which the mistake relates but treats his limited knowledge as sufficient, or the risk is allocated to him by the court on the ground that it is reasonable in the circumstances to do so. Unsurprisingly, courts are left puzzled about when to void for mistake. Courts cannot agree on what is 'mutual' and what is 'unilateral' and in many jurisdictions cases can be found in which relief is granted in both situations, however they are defined.