Misunderstanding occurs when each party has a different understanding of the terms of the agreement, in which case the courts apply a reasonable interpretation of the contract.

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When there is a misunderstanding between parties regarding the terms of an agreement, courts often apply a "reasonable person" standard to interpret the contract, aiming to find an objective understanding of the terms based on what a reasonable person would have understood them to mean.

Misunderstanding Occurs When Each Party Has a Different Understanding of the Terms