The law of unilateral and mutual mistake

Business Law - Unilateral Mistake

Business LAW: UNILATERAL MISTAKE

You are an avid collector and painter of watercolors. You enjoy visiting all of the local and regional art galleries and, routinely, you purchase work of copies of the masters. One evening, at a local gallery, you make an offer to purchase what you are told is an autographed print of a locally famous watercolor artist. The painting is framed in glare- free argon gas glass. You pay $500.00 for the print and glass.

The next evening the gallery director calls you and frantically explains that you actually purchased an original work by the artist, not the autographed print you thought you purchased. The original painting, in your possession, is worth at least $10,000.00. The gallery director asks that you return the painting, but also informs you that there exist no more autographed prints to sell to you. When you hesitate to return the painting without receiving at least the autographed print, the gallery director threatens you by stating that if you do not return the painting, she will inform all of the art galleries in the state of your refusal and ask that none of the galleries sell to you in the future.

How does the law of unilateral and mutual mistake apply?

There was no mutual mistake. The only mistake was that of the seller, making it a unilateral mistake. The buyer simply relied on the information provided by the seller. In order for the seller to assert a claim based on his mistake of fact, he would have to show that the buyer was aware of the mistake at the time of the sale and purposely remained silent to complete the transaction before the seller realized his mistake.

What about the notion of fraud? The gallery provided you with an express guarantee of authenticity of the autographed print and frame. There was no issue of fraud on the part of either party to the transaction. The seller actually provided something that was worth substantially more than the item it believed it was selling, not something worth less than represented. Even if the seller had sold an unsigned or unauthenticated copy by honest mistake, there would still be no issue of fraud, because fraud requires specific intent. In that case, the buyer would be entitled to rescind the sale or to trade the item of lesser value for the item originally bargained for, or to recoup the difference between the value received and the value for which he paid.

Did the gallery provide what it guaranteed?

No. The seller actually provided something worth much more than the item it originally guaranteed, and the mistake inured to the benefit of the buyer rather than to his detriment. There is no cause of action for accidentally benefiting the other party.

What about the element of duress?

There is no issue of duress. The requirements of duress are not met where the putative "duress" relates to something that is inconsequential like the type of threat made by the seller here. Even if the threat was credible, the requirements of duress are not met where the supposed harm threatened is capable of redress through ordinary civil procedures. In this case, if the seller made good on his threat to badmouth the buyer, the buyer could recover against him by showing that he lost out on a sale to his financial detriment and that the reason for the loss was actually attributable to the statements made by the seller to other sellers about the buyer. To claim duress, the buyer would have to have been threatened with bodily injury or other credible threat to his (or another) person.