What constitutes grounds for avoiding a contract?

The presence of mutual mistake or misrepresentation serves as grounds for avoiding a contract because it undermines the foundational elements required for a valid agreement. A contract is based on the mutual consent of the parties, which relies heavily on the accurate understanding of the terms and conditions by all involved. When a mutual mistake occurs, both parties hold a false belief about a fundamental fact related to the contract, which means they did not genuinely agree to the same terms.

Similarly, misrepresentation involves one party providing false information that the other party relies on when entering the contract. This can lead to one party suffering damages or having the contract result in an outcome that they would not have accepted had they known the truth. In both instances, the essence of informed and voluntary agreement—vital to the validity of a contract—is compromised, thus providing valid grounds for one or both parties to seek to void or rescind the contract.

Other options, while relevant to certain aspects of contract law, do not directly indicate grounds for avoiding a contract. For example, being capable of performing a contract does not infer a reason to void it; rather, it affirms the contract's enforceability. Similarly, parties fully understanding every term is a characteristic of a valid contract, not a basis