What type of mistake allows a buyer to rescind a contract and receive a full refund?

A mutual mistake of material fact occurs when both parties to a contract are mistaken about a fundamental aspect of that contract. In real estate transactions, a material fact could include misinformation about property boundaries, zoning restrictions, or the condition of the property, such as undisclosed structural issues. When both parties hold the same incorrect belief regarding a significant fact that affects the agreement, it can render the contract voidable.

In cases of mutual mistake, the law provides that the parties involved can rescind the contract and typically receive a full refund. This is because the agreement was based on shared misunderstandings that go to the essence of the contract, meaning neither party's obligation can be upheld fairly under the circumstances.

Other types of mistakes, such as unilateral mistakes, do not generally allow for contract rescission unless the other party knew or should have known about the mistake. Mistakes of law involve misinterpretations of the legal implications of a situation, which usually do not provide grounds for rescission. Statutory mistakes can vary widely in terms of enforcement and applicability, depending heavily on specific statutes, rather than general principles of contract law. Thus, these alternatives do not provide the same clear pathway to rescission and refund as a mutual mistake of material fact does.