Excuses Flashcards
When does a misunderstanding arise in a contract?
Misunderstandings arise when parties differ in their subjective understanding in terms of the contract, and a court can’t figure out in any fair or reasonable way to distinguish between the two understandings, and neither has greater responsibilities under the K.
Elements of misunderstanding
○ Parties attach materially different meanings to an important K term
○ Neither party knows or has reason to know of the understanding
What is a mistake?
A misinterpretation of the factual circumstances that gives rise to the underlying legal cause of action.
What are the elements of mutual mistake?
1) A mistake shared by both parties that existed at the time the contract was made.
2) The fact relates to a basic assumption of the contract
3) The fact has a material effect on the performance of the contract
What question must be considered when considering the enforcement of a contract entered into under a mutual mistake?
Did one of the parties bear the risk of the mistake? (if neither, then you can get out of the contract)
How is who bears the risk of a mistake determined?
a) the risk is allocated by agreement of the parties
b) they are aware, at the time the contract was made, that he only has limited knowledge with respect to the facts to which the mistake relates but treats his limited knowledge as sufficient
c) the risk is allocated by the court on the ground that it is reasonable in the circumstances to do so.
What is conscious ingnorance?
Even when the mistaken party didn’t agree to bear the risk, they may have agreed to the contract while knowing their knowledge was limited, but proceeded to perform the contract.
What is not considered a mistake?
A mistake in price, a mistaken prediction, a mistake of law, opinions, and judgments.
What is a unilateral mistake?
A mistake by only one party, some courts don’t recognize this as a mistake.
What are the elements of unilateral mistake
§ A mistake byone party relating to facts in existence at the time of the contract
§ The mistake relates to a basic assumption on which the mistaken party made the contract
§ The mistake has a material effect performance that is adverse to the mistaken party
§ The mistaken party did not bear the risk of the mistake
§ Either
a) The effect of the mistake is such that enforcement of the contract would be unconscionable or
b) The other party had reason to know of the mistake or his fault caused the mistake
