Final answer:
A contract can be rescinded if there is a mutual or bilateral mistake regarding a basic assumption upon which the contract was made, and it materially affects the agreed performances.
Step-by-step explanation:
A misunderstanding concerning a basic assumption on which a contract is made will support the rescission of the deal if the mistake is mutual or bilateral. Rescission is a remedy in contract law that effectively cancels the contract and restores the parties to their pre-contractual state.
This is permissible when both parties have made a mistake about a basic assumption on which the contract was made, and the mistake has a material effect on the agreed exchange of performances. It is not sufficient if only one party is mistaken, unless the mistake is known or should be known by the other party. Courts will often consider the equities of the situation, such as whether rescinding the contract would result in hardship for the non-mistaken party.