Page 30 Flashcards
(18 cards)
What is mistake?
An agreement where one or both parties assume something that later turned out not to be true
What is the result when mistake is made in a contract?
Agreement is voidable, and contracts can be reformed
What are the elements of mistake?
- mistake is material and not from neglect
- enforcement of contract would be unconscionable
- other party can be placed in status quo
- party wanting relief gives prompt notice of decision to rescind
- must restore/offer to restore everything of value received under the contract
What are three defenses that involve mistake?
- unilateral mistake
- unconscionability
- indefiniteness
What is unilateral mistake?
One party mistaken about a material issue in a contract (the other party must know about or have reason to know about for this to be a defense)
If a unilateral mistake is made and the other party didn’t know or have reason to know about the mistake, can the mistaken party rescind the contract?
No, the other party had to know about it or have reason to know about it to get relief
What is an example of a unilateral mistake?
Subcontractor makes a computational error in a bid.
- If the contractor had no reason to know about it, the contract can’t be rescinded
- If the error was way off, and the contractor took advantage, it can be rescinded
What are the elements of unilateral mistake?
- first prove normal mistake
- other party knew/had reason to know
- resulting contract was unconscionable
If you sign a contract that you didn’t read, what is the result?
By signing it is presumed you know the contents and are bound to what you would have discovered if you had read it
Avoidance is only allowed for unilateral mistake if what happens?
Enforcement against the mistaken party would be oppressive, avoidance imposes no substantial hardship on the other besides loss of bargain, if one party overpaid he can recover that payment
What is the voluntary payment doctrine?
Money voluntarily paid when there is uncertainty about the existence of an obligation cannot be recovered on mistake grounds
What is mutual mistake?
When both parties are mistaken about a common material issue, it makes the contract voidable by either party
If B agrees to buy land from S in a desert area and S isn’t sure if he has good title, and it turns out that he doesn’t, can B use mutual mistake?
No, because he knew there was an element of doubt
If at the time of contracting, the goods never existed, unknown to the parties, what happens?
No contract
If there is a mistake in the transcription of an agreement, what happens?
Reformation to correct the mistake to reflect the true intention of the parties
If one party knew at the time of contracting that he only had limited knowledge about the facts, and treats it as sufficient, can that result in mistake?
No, that was conscious ignorance (being aware that knowledge about the facts was limited, but performing in the face of that awareness makes you bear the risk of mistake)
According to the UCC, if a seller describes the subject matter as something other than it is, mistakenly, who has the burden of risk?
Seller
If there is an ambiguous material term that could have more than one meaning and the parties don’t intend the same meaning, what happens?
The contract is enforced according to the non-knowing party’s thought
