What happens when there are mutual mistakes regarding the existence of the subject matter in a contract?

When there are mutual mistakes regarding the existence of the subject matter in a contract, the contract becomes void. This is because a fundamental element of a valid contract is the existence of a clear and identifiable subject matter. If both parties are mistaken about the existence of the subject matter, the mutual misunderstanding affects the basis of the agreement, rendering it impossible to fulfill.

In legal terms, for a contract to be enforceable, both parties must have a shared understanding of the central elements of the contract, including the subject matter. When a mutual mistake arises regarding whether the subject matter exists, this negates the possibility of a true agreement being formed. As a result, the contract cannot be honored and is deemed void ab initio, meaning it is treated as though it never existed.

This principle helps establish the importance of clear communication and accurate representations in contracts, as significant misunderstandings about key contract elements can lead to parties being unable to rely on the validity of their agreements.