A mistake of fact prevents the formation of a contract as there cannot be agreement between the parties. The contract is
void ab initio. However in practice it is not easy for a contracting party to avoid a contract through mistake because of problems of proof, whether or not a third party may be injured and caveat emptor.

A contract may be avoided where there is a common mistake depending on the circumstances and expertise of the parties. A contract may be avoided through a mutual mistake which is a question of interpretation and the application of the reasonable person test.

However, for a unilateral mistake the contract can only be avoided where the other party was aware that the innocent party was mistaken and the mistake goes to the root of the contract. This may be fraudulent misrepresentation.