Under contract law, a misunderstanding is an objective ambiguity where two parties to a contract are subjectively thinking of two different things. Ambiguity refers to a situation where there is doubt about the meaning or intention of a contractual term, and a misunderstanding may arise out of that contractual ambiguity. As a result, the actions and other outward manifestations suggest mutual assent and a meeting of the minds, but one or both parties intend something different than what their words and actions express. A misunderstanding can be used by a party to a contract as a defense against the formation or enforcement of a contract.
[Last updated in July of 2023 by the Wex Definitions Team]