4 3 Mutual Mistakes BL

Topics: Contract, Breach of contract, Contract law Pages: 6 (1347 words) Published: April 19, 2015

4-3 Mutual Mistakes in Contract Law
Business Law

“The common-law origin of the mutual mistake doctrine in the United States is Sherwood v. Walker. Walker (a breeder) sold Sherwood (a banker) Rose 2d of Aberlone (a cow) at a low price on the basis of the parties’ mutual belief that the cow was barren. When Walker discovered the cow was pregnant and, therefore, more valuable, he refused to deliver. Sherwood sued to have the contract enforced. The trial court judgment in favor of Sherwood was reversed on appeal” (Smith, J. K., & Smith, R. L., 1990, pg. 469). When parties enter into a contractual agreement and that agreement reflects false or no longer valid information or terms, unbeknownst to the parties, it is a mutual mistake. However, when considering mutual mistakes in regards to contract law, we must keep in mind that the remedy for such a mistake is not always rendering the contract voidable. There are several factors that must be considered before a contract of mutual mistake can be revoked. The mistake must be the primary reason that both parties initially entered into the contract, the mistake must have such an impact on the agreement that it essentially becomes completely new, and there is no mutual mistake if either party knew that there was a probability of mistake when the contract was signed. The validity and rescission of the contract depends on how these three elements are applied to each instance of mutual mistake. In the scenario provided, Mr. Hartly entered into a purchasing agreement with the auto dealership in order to buy a car. Unfortunately, neither Mr. Hartly nor the dealership recognized their mistake when seeking to procure a car with a 3.2 liter V-6 engine. The failure of both parties to recognize that the contracted item was no longer available makes this a clear instance of mutual mistake, however whether the contract should be completely voided or reformed requires further examination. The first element that must be considered is whether the dealerships inability to deliver the exact car that Mr. Hartly contracted to purchase “go against the basic assumption of the contract” (LaMance, K., 2014, para 4). Mr. Hartly sought out a very specific car for very specific reasons. He did not want to purchase the car with a more powerful engine because of concerns about gas consumption. Even though the available car had a smaller engine than the one he emphatically stated he did not want, it was still larger than the 3.2 liter engine he contracted to buy. This point could be argued both ways. Save the difference in engine, Mr. Hartly would presumable be receiving the exact car he wanted to buy. Essentially, Mr. Hartly entered into this agreement to receive a car of a specific make and model and because those aspects of the contract are able to be met, then the basic assumption has been met as well and the contract could not be void. Conversely, the fact that Mr. Hartly’s focus was on the engine size could be construed that be basic assumption of the agreement was more about the engine size and less about the car. If this train of thought is ascribed to then the inability of the dealership to deliver the exact car stated in the contract means that there is reason for the contract to be void. Next, the mistake “must have a material effect on performance” (LaMance, K., 2014, para 5). In order for a contract impacted by mutual mistake to be voided, one must prove the execution of the contract would require such a drastic change, it would be like executing a completely different contract. For example; if George contracts with Erik to make him a new wardrobe and then later finds that Erik only makes clothes for toddlers, the change to the contract would be drastic. In the instance of Mr. Hartly, the engine is an important and essential part of the car however most courts would probably say that an incorrect engine alone does not constitutes a breach of contract. The ability of the dealership to...
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