Mutual mistake of fact and contract rescission in purchase agreements

Contract Law Mistakes Mutual Mistakes in Contract Law

Contract Law Mistakes

This paper will analyze a case that explores mistakes under contract law. Both of the parties will be investigated in this case. It will also study the concept of mutual mistake of fact, and whether rescission of the contract can be done.

Analysis

Mistake of fact may be one of the factors that eliminates or reduces criminal culpability or civil liability. It holds no consequence if it doesn't stem from forgetfulness or unconscious ignorance. An individual cannot escape criminal or civil liability for deliberate mistakes. A mistake of fact under contract law may be brought forward as a form of defense by any party that seeks to evade liability under any contract. Furthermore, mistakes of fact may be affirmatively employed for canceling, rescinding, or reforming contracts. They can have an impact on the contract only in case the detail was crucial, or material, for the agreement. Assume, for instance, that a vendor of books has decided to sell a Virginia Woolf book, autographed by the author. Further assume that the customer only wants to purchase the book as it contains the late author's autograph (Legal Dictionary a., n.d). This fact is known by the seller; also, an authentic autograph commands a very steep price. If the customer later discovers that this signature isn't authentic but was, in fact, forged years ago, and neither her nor the seller were aware of this forgery, it would be considered as a mistake of fact, which is material to the purchase; therefore, the customer can return the purchased book and request a refund. This example explains the concept of mutual mistake, or some material fact that both parties have mistaken. In this sort of instance, the party affected adversely by a mistake is entitled to rescind or cancel the contract. When the mistake is unilateral, only one of the parties to the contract is mistaken concerning some material fact. Here, the party affected adversely by this mistake cannot avoid the agreement unless the mistake was known or ought to have been known by the second party, or unless the latter was duty-bound to reveal the fact that was mistaken (Legal Dictionary a., n.d). Assume, for instance, that an individual owns a pricey sports car, which is in excellent condition. Further supposing that the owner is asked by a neighbor if he is willing to sell it; the owner responds in the affirmative, stating that he will sell it for '30 bills'. In case the neighbor comes with 30 dollars, no deal is formed, since the neighbor was mistaken in his assumption that the car would cost him $30, when in fact, the owner used the slang term for $30,000. Also, the neighbor ought to have realized that such an expensive automobile couldn't possibly have been sold for a mere $30. Thus, in this instance, the parties should be capable of rescinding the contract, as the mistake was genuine, and not one made from malice or any such ill-intent. Both parties did not act in an unethical manner, as neither party intended, or knew of, the mistake.

If the agreement is with regard to a goods sale (i.e., a commodity that is portable) in some commercial scenario, one must apply New Mexico's Uniform Commercial Code (UCC). This code can be obtained at New Mexico Statutes Annotated (NMSA) §55-1-101 through -725. The UCC is typically applicable to sale of merchandise involving a merchant. An example of when this code can apply to an agreement for a goods sale is illustrated below. Parties to an agreement may desire to change or modify the contract's terms, at any point (Welcome -- Judicial Education Center). The conditions for contract modification vary based on whether a given contract involves goods sale by or to a merchant. UCC is applicable to agreements for goods sales by or to a merchant. Additional consideration, under this code, is not required for modifying a written agreement, so long as such a modification takes place in good faith. When the agreement is not for goods sales by or to a merchant, it requires additional considerations for modifying its terms. For instance, Marge has entered into a contract for selling her automobile to Paul. Both desire a change in some conditions of the agreement. As the UCC is not applicable to sale of an automobile between two private parties, a new consideration has to be exchanged, for the contract to be modifiable (Welcome -- Judicial Education Center).

Mutual mistakes regarding some material fact, enables the affected party to dissolve the contract, if it hasn't already attained completion. Rescission proves to be unjust for the second party. Rescission can be permitted for one-sided or unilateral mistakes, as well as, for preventing the other party's Unjust Enrichment (Legal Dictionary. b., n.d.). Upon rescission, the affected party is entitled to recover his/her money paid, or property delivered by him/her under the agreement. Thus, in this instance, John as well as the salesperson would probably be the winners, with the manufacturer being the losing party.