Mutual vs. Unilateral Mistake: What Makes an Agreement Voidable?

When someone signs a settlement or other agreement, the general assumption is that the agreement is final. But sometimes, mistakes do happen. When those mistakes happen in the midst of a contract formation – sometimes the courts recognize that the contract can be voided based on that mutual mistake.

While Illinois courts recognize that mistakes happen in contract formation—not all mistakes are treated equally. It is important to understand the critical legal distinction between a “mutual mistake” and a “unilateral mistake.” And how that distinction determines whether a contract can be voided on account of the mistake.

This article will provide some general outlines on the concept of mistake in contracting. For official legal advice specific to your situation, contact an experienced attorney at Patel Law, PC.

Mutual Mistake

A mutual mistake may be present if both parties in a contract were mistaken about a material fact of the agreement, that goes to the heart of the agreement. In such situations, a court may rescind or reform the contract based on the mutual mistake.

Unilateral Mistake

A unilateral mistake occurs if only one party to the agreement is mistaken as to the material fact. The other party does fully understand. Courts generally do not rescind contracts on the basis of unilateral mistakes. However, exceptions exist if one party is found to have engaged in fraud, misrepresentation, or inequitable conduct.

Practical Differences

Below is a simple table to give more of a visual for how these issues relate to one another:

Sample Scenario

Let’s say, as an over-simplified sample scenario, you have an employee working for a chemical storage facility. The facility intakes a new chemical and there is a containment issue. The chemical is released into the facility and the employee is exposed. The employee immediately develops a strange mole. The employee goes to see the dermatologist who sends a sample to the lab and reports back that the mole was found to be totally benign, no medical cause for concern. The employee informs the employer of the diagnosis and signs a release relating to the chemical exposure and the mole, because the diagnosis from the dermatologist was that the mole was benign. Two weeks later, the dermatologist calls back and states that there was a mix-up with the samples at the lab facility and they believe the test results were reported in error. The mole is tested again, and comes back as cancerous.

The above scenario would require several legal steps to be properly managed. However, at a baseline level, one can see here that the release was entered into due to a mutual mistake. The release was signed by both parties under the mistaken belief of the misdiagnosis given by the dermatologist. The mistaken belief went to the heart of the release agreement – because the release was about the nature of the mole and the chemical exposure. Now that both parties are aware of the mistake, the release would almost certainly not be held up in court.

Contact Patel Law

A Danville personal injury attorney at Patel Law can help you through any twist or turn your face in your own personal injury lawsuit. Contact our office today to begin speaking with our dedicated team.

Sources:

law.cornell.edu/wex/mutual_material_mistake

masslawyersweekly.com/2025/05/23/10m-severance-contract-ambiguity-ruling/