Rescission applies to which types of mistake?

Rescission applies to which types of mistake?

• A. Mutual and unilateral mistakes
• B. Only mutual mistakes
• C. Only unilateral mistakes
• D. No mistakes allowed

Answer: (A)

Rescission is the remedy that cancels a contract and puts the parties back in their pre-contract positions when something goes wrong at the time the agreement was formed. Mistake can ground rescission in two ways. First, a mutual mistake occurs when both sides share an incorrect understanding about a fundamental fact underlying the contract. Second, a unilateral mistake involves only one party being mistaken, and rescission may still be available if that mistake is material and the other party knew about it, caused it, or the mistaken party did not bear the risk of the mistake. Because rescission can arise from either type of mistake, the statement that includes both mutual and unilateral mistakes is correct. The other options try to limit rescission to one kind or deny it entirely, which doesn’t fit how mistake can affect contract formation.

Rescission is the remedy that cancels a contract and puts the parties back in their pre-contract positions when something goes wrong at the time the agreement was formed. Mistake can ground rescission in two ways. First, a mutual mistake occurs when both sides share an incorrect understanding about a fundamental fact underlying the contract. Second, a unilateral mistake involves only one party being mistaken, and rescission may still be available if that mistake is material and the other party knew about it, caused it, or the mistaken party did not bear the risk of the mistake.

Because rescission can arise from either type of mistake, the statement that includes both mutual and unilateral mistakes is correct. The other options try to limit rescission to one kind or deny it entirely, which doesn’t fit how mistake can affect contract formation.