Which type of mistake is defined as one where both parties are mistaken about a fundamental fact?

The type of mistake defined as one where both parties are mistaken about a fundamental fact is known as a mutual mistake. In legal contexts, a mutual mistake occurs when both parties to a contract have a shared misunderstanding regarding an essential aspect of the agreement, which can undermine the basis of the contract itself. For instance, if two parties enter into a contract believing that a certain property is a legitimate asset when, in fact, it does not exist, this mutual misunderstanding can lead to the contract being voided or rescinded because the agreement relies on the erroneous belief of a fundamental fact.

In contrast, a common mistake specifically refers to a situation where both parties erroneously believe the same fact to be true, but the term is often used interchangeably with mutual mistake. However, mutual mistake is generally a wider term recognizing instances where both parties misunderstand either different aspects or the implications of a shared incorrect fact.

Unilateral mistakes occur when only one party is mistaken about a material fact, which does not automatically influence the second party's understanding of the agreement. Conceptual mistakes relate to misunderstandings over the terms or concepts within the contract, which may not impact the agreement's fundamental nature as much as mutual mistakes do.