This is also known as non-identical mistake, mutual mistake and mistake negativing consent. It occurs where each party has a different view of the situation. It is rare for a cross-purposes mistake to make a contract void at common law. The courts will simply decide whether a reasonable on-looker would have understood the contract to mean what one party thought it meant, or what the other party thought it meant.
There are three situations where a cross-purposes mistake can make a contract void;
- Where the mistake was negligently induced by the other party,
- Where the parties are at such cross-purposes that a reasonable observer would not be able to say what they had agreed, and
- Where one party knew of the other’s mistake (this is called unilateral mistake).
A unilateral mistake will only make a contract void if it concerns the identity of one of the parties or the terms of the contract, and is fundamental to the contract.
A unilateral mistake about the quality of the subject matter of the contract is not sufficient.
Mistaken identity
There is a presumption that a contract is valid even where one party has made a mistake as to the identity of the other. But this presumption may be rebutted by the party who has made the mistake, and if this is done, the contract will be void at common law. In other to rebut the presumption, the mistaken party must prove that they intended to deal with some person other than the person who was in fact the other party to the contract, and that the identity of the other party was regarded as of fundamental importance. Both conditions are inextricably linked.
Mistake over the terms of the contract
Where one party is mistaken as to the terms of the contract, and the other knows this, the contract will be void, regardless of whether the term is fundamental.
Equity and cross-purposes mistake
Like common law, equity rarely allows a mutual cross-purposes mistake to affect a contract, though it will occasionally refuse specific performance where the parties have made such mistake.
As regards unilateral mistake, there are some rather rare situations in which equity has provided a remedy where the common law would not; it can offer relief to a party who has made a mistake which is not fundamental in the narrow common law sense, and has even intervened where a mistake has been made which merely affects the value of the thing sold.