Which mistake occurs when both parties are mistaken about a fundamental fact?

A bilateral mistake occurs when both parties involved in a contract are mistaken about a fundamental fact that is essential to the agreement. This type of mistake affects the validity of the contract because it can alter the understanding and intentions of the parties involved, leading them to enter into an agreement based on false premises.

For example, if both parties in a contract believe they are selling and buying a specific piece of property, but it turns out that the property is mistakenly identified (perhaps it doesn't exist or was misrepresented), this would be a bilateral mistake regarding a fundamental fact. In such cases, either party may have the right to void the contract because the agreement was based on a shared misunderstanding.

In contrast, a unilateral mistake occurs when only one party is mistaken about a fact, which may not necessarily void the contract unless the other party knew or should have known about the mistake. Fraud involves deception, where one party intentionally misleads another, significantly differing from a mutual misunderstanding. Coercion refers to forcing someone into an agreement through threats or intimidation, which again is separate from the concept of shared misunderstanding in a bilateral mistake.