What is the result of a mutual misunderstanding between parties regarding a contract term?

A mutual misunderstanding regarding a contract term can lead to the contract being voidable. This means that one or both parties have the option to rescind the contract because the misunderstanding goes to the essence of the agreement. When both parties have a different interpretation of a contract term and that misunderstanding impacts their agreement significantly, it indicates a lack of consensus ad idem—meaning a "meeting of the minds."

If the misunderstanding affects the fundamental aspects of the contract, it can render the agreement unenforceable unless clarified or agreed upon. This allows the party who was misled or who did not agree to the terms as understood by the other party to have the choice to affirm the contract or to void it.

In contrast, a valid contract would remain enforceable if the misunderstanding were minor or if the parties could still fulfill their obligations based on the overall spirit of the agreement. Likewise, automatically cancelling the contract would not be appropriate because mutual misunderstanding doesn't necessarily invalidate the entire agreement but rather gives the affected party options.