Chapter 6. Mistake (151-158)

Question 1

A, an owner of land, and B, a builder, make a contract under which B is to take from A’s land, at a stated rate per cubic yard, all the gravel and earth necessary for the construction of a bridge, an amount estimated to be 114,000 cubic yards. A and B believe that all of the gravel and earth is above water level and can be removed by ordinary means, but in fact about one quarter of it is below water level, so that removal will require special equipment at an additional cost of about twenty percent. Is this contract voidable?

Answer 1

The contract is not voidable by B, because the court will allocate to B the risk of the mistake. Compare Illustration 5 to § 266. Restatement 2d of Contracts § 154(d)

Question 2

A contracts with B to raise and float B’s boat which has run aground on a reef. At the time of making the contract, A believes that the sea will remain calm until the work is completed. Several days later, during a sudden storm, the boat slips into deep water and fills with mud, making it more difficult for A to raise it. Is this contract enforceable?

Answer 2

Although A may have shown poor judgment in making the contract, there was no mistake of either A or B, and the rules stated in this Chapter do not apply. Whether A is discharged by supervening impracticability is governed by the rules stated in Chapter 11. See Illustration 5 to § 261. If, however, the boat had already slipped into deep water at the time the contract was made, although they both believed that it was still on the reef, there would have been a mistake of both A and B. Its legal consequences, if any, would be governed by the rule stated in § 152. Restatement 2d of Contracts § 151(a)

Question 3

A contracts to sell and B to buy stock amounting to a controlling interest in C Corporation. At the time of making the contract, both A and B believe that C Corporation will have earnings of $1,000,000 during the following fiscal year. Because of a subsequent economic recession, C Corporation earns less than $500,000 during that year. Is this contract enforceable?

Answer 3

Although B may have shown poor judgment in making the contract, there was no mistake of either A or B, and the rules stated in this Chapter do not apply. See Uniform Commercial Code § 8-306(2). Restatement 2d of Contracts § 151(a)

Question 4

A contracts to sell a tract of land to B. Both parties understand that B plans to erect an office building on the land and believe that he can lawfully do so. Unknown to them, two days earlier a municipal ordinance was enacted requiring a permit for lawful erection of such a building. Is this contract enforceable?

Answer 4

There is a mistake of both A and B. Its legal consequences, if any, are governed by the rule stated in § 152. See Illustration 7 to § 152. Restatement 2d of Contracts § 151(b)

Question 5

A contracts to sell and B to buy a tract of land, the value of which has depended mainly on the timber on it. Both A and B believe that the timber is still there, but in fact it has been destroyed by fire. Is this contract voidable?

Answer 5

The contract is voidable by B. Restatement 2d of Contracts § 152(b)

Question 6

A contracts to sell and B to buy a tract of land, on the basis of the report of a surveyor whom A has employed to determine the acreage. The price is, however, a lump sum not calculated from the acreage. Because of an error in computation by the surveyor, the tract contains ten per cent more acreage than he reports. Is this contract voidable?

Answer 6

The contract is voidable by A. Compare Illustrations 8 and 11 to this Section and Illustration 2 to § 158. Restatement 2d of Contracts § 152(b)

Question 7

A contracts to sell and B to buy a tract of land. B agrees to pay A $100,000 in cash and to assume a mortgage that C holds on the tract. Both A and B believe that the amount of the mortgage is $50,000, but in fact it is only $10,000. Is this contract voidable?

Answer 7

The contract is voidable by A, unless the court supplies a term under which B is entitled to enforce the contract if he agrees to pay an appropriate additional sum, and B does so. See Illustration 2 to § 158. Restatement 2d of Contracts § 152(b)

Question 8

A contracts to sell and B to buy a debt owed by C to A, and secured by a mortgage. Both A and B believe that there is a building on the mortgaged land so that the value of the mortgaged property exceeds that of the debt, but in fact there is none so that its value is less than half that of the debt. Is this contract voidable?

Answer 8

The contract is voidable by B. See § 333. Restatement 2d of Contracts § 152(b)

Question 9

A contracts to assign to B for $100 a $10,000 debt owed to A by C, who is insolvent. Both A and B believe that the debt is unsecured and is therefore, virtually worthless, but in fact it is secured by stock worth approximately $5,000. Is this contract voidable?

Answer 9

The contract is voidable by A. Restatement 2d of Contracts § 152(b)

Question 10

A pays B, an insurance company, $100,000 for an annuity contract under which B agrees to make quarterly payments to C, who is 50 years old, in a fixed amount for the rest of C’s life. A and B believe that C is in good health and has a normal life expectancy, but in fact C is dead. Is this contract voidable?

Answer 10

The contract is voidable by A. Restatement 2d of Contracts § 152(b)

Question 11

A contracts to sell a tract of land to B. Both parties understand that B plans to erect an office building on the land and believe that he can lawfully do so. Unknown to them, two days earlier a municipal ordinance was enacted requiring a permit for lawful erection of such a building. Is this contract voidable?

Answer 11

In determining whether the effect on the agreed exchange is material, and the contract therefore voidable by B, the court will consider not only the decrease in its desirability to B but also any advantage to A through his receiving a higher price than the land would have brought on the market had the facts been known. See Illustration 3 to § 151. Restatement 2d of Contracts § 152(c)

Question 12

A contracts to sell and B to buy a tract of land, which they believe contains 100 acres, at a price of $1,000 an acre. In fact the tract contains 110 acres. Is this contract voidable?

Answer 12

The contract is not voidable by either A or B, unless additional facts show that the effect on the agreed exchange of performances is material. Restatement 2d of Contracts § 152(c)

Question 13

A contracts to sell and B to buy a dredge which B tells A he intends to use for a special and unusual purpose, but B does not rely on A’s skill and judgment. A and B believe that the dredge is fit for B’s purpose, but in fact it is not, although it is merchantable. Is this contract voidable?

Answer 13

The contract is not voidable by B because the effect on the agreed exchange of performances is not material. If B’s purpose is substantially frustrated, he may have relief under § 266(2). See also Uniform Commercial Code §§ 2-314, 2-315. Restatement 2d of Contracts § 152(c)

Question 14

A and B agree that A will sell and B will buy a tract of land for $100,000, payable by $50,000 in cash and the assumption of an existing mortgage of $50,000. In reducing the agreement to writing, B’s lawyer erroneously omits the provision for assumption of the mortgage, and neither A nor B notices the omission. Is this contract voidable?

Answer 14

Under the rule stated in § 155, at the request of either party, the court will decree that the writing be reformed to add the provision for assumption of the mortgage. The contract is, therefore, not voidable by A because, when account is taken of the availability to him of reformation, the effect on the agreed exchange of performances is not material. See Illustration 1 to § 155. Restatement 2d of Contracts § 152(d)

Question 15

A contracts to sell and B to buy a tract of land, described in the contract as containing 100 acres, at a price of $100,000, calculated from the acreage at $1,000 an acre. In fact the tract contains only 90 acres.How might this contract be voidable?

Answer 15

If B is entitled to a reduction in price of $10,000, under the rule stated in § 158(2), the contract is not voidable by B because when account is taken of the availability to him of a reduction in price, the effect on the agreed exchange of performances is not material. See Illustration 1 to § 158. As to the possibility of an argument based on frustration, see § 266(2). Restatement 2d of Contracts § 152(d)

Question 16

A has a claim against B for B’s admitted negligence, which appears to have caused damage to A’s automobile in an amount fairly valued at $600. In consideration of B’s payment of $600, A executes a release of “all claims for injury to person or property” that he may have against B. Both A and B believe that A has suffered damage to property only, but A later discovers that he has also suffered personal injuries in the extent of $20,000. Is this release voidable?

Answer 16

The release is voidable by A. Restatement 2d of Contracts § 152(f)

Question 17

A has a claim against B for B’s admitted negligence, which appears to have caused personal injuries to A’s back in an amount fairly valued at $10,000, although the parties are aware that A may require further treatment. In consideration of B’s payment of $15,000, A executes a release of “all claims for injury to person or property” that he may have against B. A later incurs additional expenses of $20,000 in connection with his back, which was injured more seriously than he had believed. Is this release voidable?

Answer 17

The release is not voidable by A. Restatement 2d of Contracts § 152(f)

Question 18

A, a violinist, contracts to sell and B, another violinist, to buy a violin. Both A and B believe that the violin is a Stradivarius, but in fact it is a clever imitation. Is this contract voidable?

Answer 18

A makes no express warranty and, because he is not a merchant with respect to violins, makes no implied warranty of merchantibility under Uniform Commercial Code § 2-314. The contract is voidable by B. Restatement 2d of Contracts § 152(g)

Question 19

In response to B’s invitation for bids on the construction of a building according to stated specifications, A submits an offer to do the work for $150,000. A believes that this is the total of a column of figures, but he has made an error by inadvertently omitting a $50,000 item, and in fact the total is $200,000. B, having no reason to know of A’s mistake, accepts A’s bid. If A performs for $150,000, he will sustain a loss of $20,000 instead of making an expected profit of $30,000. How might this contract be voidable?

Answer 19

If the court determines that enforcement of the contract would be unconscionable, it is voidable by A. Restatement 2d of Contracts § 153(c)

Question 20

In response to B’s invitation for bids on the construction of a building according to stated specifications, A submits an offer to do the work for $150,000. A believes that this is the total of a column of figures, but he has made an error by inadvertently omitting a $35,000 item which would have made the total $185,000, so that if he does the work for $150,000 he will sustain a loss of $5,000 rather than make a profit of $30,000. B, having no reason to know of A’s mistake, accepts A’s bid. How might this contract not be voidable?

Answer 20

The court may reach a result contrary to that in § 153, Illustration 1, on the ground that enforcement of the contract would not be unconscionable, and hold that it is not voidable by A. Restatement 2d of Contracts § 153(c)

Question 21

In response to B’s invitation for bids on the construction of a building according to stated specifications, A submits an offer to do the work for $150,000. A believes that this is the total of a column of figures, but he has made an error by inadvertently omitting a $50,000 item, and in fact the total is $200,000. If A performs for $150,000, he will sustain a loss of $20,000 instead of making an expected profit of $30,000. B has not accepted A’s bid before notification of the mistake, but by statute A’s bid is an irrevocable option contract because B is a state agency. In addition, A has posted a $10,000 bidder’s bond with S as surety. How might this contract be voidable? What, then, happens to S?

Answer 21

If the court determines that enforcement of the option contract would be unconscionable, it is voidable by A and, on avoidance by A, S is not liable on the bond. Restatement 2d of Contracts § 153(c)

Question 22

In response to B’s invitation for bids on the construction of a building according to stated specifications, A submits an offer to do the work for $150,000. A believes that this is the total of a column of figures, but he has made an error by mistakenly interpreting B’s specifications. , and in fact the total is $200,000. If A performs for $150,000, he will sustain a loss of $20,000 instead of making an expected profit of $30,000. B, having no reason to know of A’s mistake, accepts A’s bid. How might this contract be voidable?

Answer 22

If the court determines that enforcement of the contract would be unconscionable, it is voidable by A. Restatement 2d of Contracts § 153(c)

Question 23

A writes B offering to sell for $100,000 a tract of land that A owns known as “201 Lincoln Street.” B, who mistakenly believes that this description includes an additional tract of land worth $30,000, accepts A’s offer. How might this contract be voidable?

Answer 23

If the court determines that enforcement of the contract would be unconscionable, it is voidable by B. Restatement 2d of Contracts § 153(c)

Question 24

A offers to sell B goods shipped from Bombay ex steamer “Peerless.” B accepts. There are two steamers of the name “Peerless” sailing from Bombay at materially different times. B means Peerless No. 2, and A has reason to know this. A means Peerless No. 1, but B has no reason to know this. How might this contract be voidable?

Answer 24

Under the rule stated in § 20 there is a contract for the sale of goods from Peerless No. 2, but, under the rule stated in this Section, if the court determines that its enforcement would be unconscionable, it is voidable by A. See Illustration 4 to § 20. Restatement 2d of Contracts § 153(c)

Question 25

In response to an invitation from B, a general contractor, for bids from subcontractors, A submits an offer to B to do paving work for $10,000, to be used by B as a partial basis for B’s bid on a large building. As A knows, B is required to name his subcontractors in his general bid. Because of the short time in which A has to prepare his bid, A inadvertently totals his bid as $10,000 rather than $15,000. B uses A’s bid in arriving at his offer of $100,000, making A’s offer irrevocable as an option contract (§ 87). B’s offer is accepted, but A discovers his mistake before B accepts his bid. Is this contract voidable?

Answer 25

The option contract is not voidable by A because of B’s reliance by using A’s offer in making up his own offer. See Illustration 6 to § 87. Restatement 2d of Contracts § 153(d)

Question 26

In response to B’s invitation for bids on the construction of a building according to stated specifications, A submits an offer to do the work for $150,000. A believes that this is the total of a column of figures, but he has made an error by inadvertently omitting a $50,000 item, and in fact the total is $200,000. If A performs for $150,000, he will sustain a loss of $20,000 instead of making an expected profit of $30,000. B, having no reason to know of A’s mistake, accepts A’s bid. A, upon discovery of the error, refuses to perform for $150,000, and B is no longer able to accept the next lowest bid and has to re-advertise for bids at a cost of $1,000 before getting a bid that he accepts. How might this contract be voidable?

Answer 26

If the court determines that enforcement of the contract would be unconscionable, the contract is voidable by A in spite of B’s reliance, because B can be adequately protected by holding A liable for the $1,000 cost of re-advertising (see § 158(1) and Comment b to that Section). Restatement 2d of Contracts § 153(d)

Question 27

In response to B’s invitation for bids on the construction of a building according to stated specifications, A submits an offer to do the work for $150,000. A believes that this is the total of a column of figures, but he has made an error by inadvertently omitting a $50,000 item, and in fact the total is $200,000. If A performs for $150,000, he will sustain a loss of $20,000 instead of making an expected profit of $30,000. B, having no reason to know of A’s mistake, accepts A’s bid. Although A does not prove what his profit or loss will be if he performs, but B had estimated the expected cost as $180,000 before advertising for bids and the ten other bids were all in the range between $180,000 and $200,000. How might this contract be voidable?

Answer 27

If it is determined, because of the discrepancy between A’s bid on the one hand and B’s estimate and the ten other bids on the other, that B had reason to know of A’s mistake, the contract is voidable by A. Restatement 2d of Contracts § 153(e)

Question 28

In response to an invitation from B, a general contractor, for bids from subcontractors, A submits an offer to B to do paving work for $10,000, to be used by B as a partial basis for B’s bid on a large building. As A knows, B is required to name his subcontractors in his general bid. Because of the short time in which A has to prepare his bid, A inadvertently totals his bid as $10,000 rather than $15,000. B uses A’s bid in arriving at his offer of $100,000, making A’s offer irrevocable as an option contract (§ 87). B’s offer is accepted, but A discovers his mistake before B accepts his bid. How might this contract voidable by A?

Answer 28

If it is determined that B had reason to know of A’s mistake, the contract is voidable by A. Restatement 2d of Contracts § 153(e)

Question 29

In answer to an inquiry from “J.B. Smith Company,” A offers to sell goods for cash on delivery. A mistakenly believes that the offeree is John B. Smith, who has an established business of good repute, but in fact it is a business run by his son, whose business is new and near insolvency. The son accepts, not knowing of A’s mistake. How might this contract not be voidable?

Answer 29

If the court concludes that, because payment is to be cash on delivery, enforcement of the contract would not be unconscionable, the contract is not voidable by A. Restatement 2d of Contracts § 153(g)

Question 30

In answer to an inquiry from “J.B. Smith Company,” A’s offer is to sell goods on 90 days credit. A mistakenly believes that the offeree is John B. Smith, who has an established business of good repute, but in fact it is a business run by his son, whose business is new and near insolvency. The son accepts, not knowing of A’s mistake. How might this contract be voidable?

Answer 30

If the court determines that, because payment is to be on 90 days credit, enforcement of the contract would be unconscionable, the contract is voidable by A. See §§ 251, 252. Uniform Commercial Code §§ 2-609, 2-702(1). Restatement 2d of Contracts § 153(g)

Question 31

The facts being otherwise as stated in Illustration 11, A’s offer contains references to “your long established business” from which the son had reason to know of A’s mistake. Is this contract voidable?

Answer 31

The contract is voidable by A. Restatement 2d of Contracts § 153(g)

Question 32

A contracts to sell and B to buy a tract of land. A and B both believe that A has good title, but neither has made a title search. The contract provides that A will convey only such title as he has, and A makes no representation with respect to title. In fact, A’s title is defective. Is this contract voidable?

Answer 32

The contract is not voidable by B, because the risk of the mistake is allocated to B by agreement of the parties. Restatement 2d of Contracts § 154(b)

Question 33

A contracts to sell and B to buy a tract of land, on the basis of the report of a surveyor whom A has employed to determine the acreage. The price is, however, a lump sum not calculated from the acreage. A proposes to B during the negotiations the inclusion of a provision under which the adversely affected party can cancel the contract in the event of a material error in the surveyor’s report, but B refuses to agree to such a provision. Because of an error in computation by the surveyor, the tract contains ten per cent more acreage than he reports. Is this contract voidable?

Answer 33

The contract is not voidable by A, because A bears the risk of the mistake. Restatement 2d of Contracts § 154(c)

Question 34

A pays B, an insurance company, $100,000 for an annuity contract under which B agrees to make quarterly payments to C, who is 50 years old, in a fixed amount for the rest of C’s life. A and B believe that C is in good health and has a normal life expectancy, but in fact C is afflicted with an incurable fatal disease and cannot live more than a year. Is this contract voidable?

Answer 34

The contract is not voidable by A, because the court will allocate to A the risk of the mistake. Restatement 2d of Contracts § 154(c)

Question 35

A contracts with B to build a house on B’s land. A and B believe that subsoil conditions are normal, but in fact some of the land must be drained at an expense that will leave A no profit under the contract. Is this contract voidable?

Answer 35

The contract is not voidable by A, because the court will allocate to A the risk of the mistake. Compare Illustration 8 to § 266. Restatement 2d of Contracts § 154(d)

Question 36

In response to B’s invitation for bids on the construction of a building according to stated specifications, A submits an offer to do the work for $150,000. A believes that this is the total of a column of figures, but A has made a mistaken estimate as to the amount of labor required to do the work, and in fact the total is $200,000. B, having no reason to know of A’s mistake, accepts A’s bid. If A performs for $150,000, he will sustain a loss of $20,000 instead of making an expected profit of $30,000. Is this contract voidable?

Answer 36

A cannot avoid the contract, because the court will allocate to A the risk of the mistake. Restatement 2d of Contracts § 154(d)

Question 37

A and B agree that A will sell and B will buy a tract of land for $100,000 and that B will assume an existing mortgage of $50,000. In reducing the agreement to writing, B’s lawyer erroneously omits the provision for assumption, and neither A nor B notices the omission. Can this contract be reformed?

Answer 37

At the request of either A or B, the court will reform the writing to add the provision for assumption. Restatement 2d of Contracts § 155(a)

Question 38

A and B agree that A will sell and B will buy all the coal that B shall require in his business during a five year period. In reducing the agreement to writing, B mistakenly provides that he will buy all the coal that he shall desire to buy during that period, and A fails to notice the error. Can this contract be reformed?

Answer 38

At the request of either A or B, the court will reform the writing to provide that B will buy all the coal that he shall require rather than all that he shall desire to buy. Restatement 2d of Contracts § 155(a)

Question 39

A agrees with B to guarantee the collectibility of a debt owed by C to B. In reducing the agreement to writing, the parties mistakenly choose words that, unknown to both of them, have the effect of making A an ordinary guarantor rather than a guarantor of collectibility only. Can this contract be reformed?

Answer 39

At the request of either A or B, the court will reform the writing to limit A’s obligation to that of a guarantor of collectibility. Restatement 2d of Contracts § 155(a)

Question 40

A and B make a written contract for the sale by A to B for $15,000 of a claim by A against C. Both parties mistakenly believe that the claim is an unliquidated one for about $20,000, but in fact it does not exceed $10,000. Can this contract be reformed?

Answer 40

A court will not, at the request of B, reform the writing, because the mistake of the parties was not one as to its contents or effect. B’s right to avoidance is governed by the rule stated in § 152. See Illustration 4 to § 152. Restatement 2d of Contracts § 155(b)

Question 41

A contracts to sell and B to buy a tract of land, described in the contract as containing 100 acres, at a price of $100,000. Both parties believe that the area is 100 acres but in fact it is only 90 acres. Can this contract be reformed?

Answer 41

The court will not, at the request of B, reform the writing, because the mistake of the parties was not one as to its contents or effect. B’s right to avoidance is governed by the rules stated in §§ 152 and 158. See Illustration 11 to § 152 and Illustration 1 to § 158. Restatement 2d of Contracts § 155(b)

Question 42

A and B agree that A shall have the exclusive right to market goods manufactured by B and that A shall pay B half of any profits he derives from their sale. The agreement is then reduced to writing. Each party understands that A is to use best efforts to promote sale of the goods and that B will use best efforts to supply them, but nothing is said on this subject. Can this contract be reformed?

Answer 42

Under the rule stated in § 204 a court will supply a term imposing on both A and B an obligation to use best efforts, and it will not reform the writing. See Illustration 9 to § 77 and Uniform Commercial Code § 2-306(2). Restatement 2d of Contracts § 155(b)

Question 43

A agrees to sell and B to buy the American patent rights on an invention as to which A holds American, British and French patent rights. In reducing their agreement to writing, the parties use the term “all patent rights,” meaning all American rights. Can this contract be reformed?

Answer 43

A court will interpret the writing in the light of the circumstances to cover only the American and not the British or French patent rights, and it will not reform the writing. See Illustration 2 to § 212. Restatement 2d of Contracts § 155(b)

Question 44

A gives B a note for $50,000, loaned to him by B, and also gives B a written contract by which A promises to execute a mortgage on land that he owns as security for the note. Because of a mistake of both parties as to the contents of the writing, it fails to express their agreement that the mortgage is to be subject to another mortgage for $30,000 for which A is then bargaining. B negotiates the note and assigns the contract to C, a good faith purchaser for value. Can this contract be reformed?

Answer 44

The court will not, at the request of A, reform the writing because to do so would adversely affect C, a good faith purchaser. Restatement 2d of Contracts § 155(f)

Question 45

The facts being otherwise as stated in Illustration 8, B does not transfer the note and contract to C, a good faith purchaser, but D, a judgment creditor of B, attaches the claim. Can this contract be reformed?

Answer 45

The court will, at the request of A, reform the writing so that the mortgage is to be subject to the $30,000 mortgage, because D is not a good faith purchaser or other third party taking an interest in property in a voluntary transaction. The result would be the same if B instead went into bankruptcy and D were B’s trustee. Restatement 2d of Contracts § 155(f)

Question 46

A agrees to sell and B to buy a tract of land for $100,000. In preparing a writing that the parties intend to be a completely integrated agreement, A’s secretary erroneously types “$10,000” instead of “$100,000,” and both A and B sign without noticing the error. Can this contract be reformed?

Answer 46

Although the agreement is within the Statute of Frauds (§ 125), at the request of either A or B, the court will reform the writing to read “$100,000.” Rst. 156(a)

Question 47

A agrees to sell and B to buy a tract of land for $100,000. In preparing a writing––which the parties do not intend the writing to be an integrated agreement but a mere memorandum evidencing the agreement––A’s secretary erroneously types “$10,000” instead of “$100,000,” and both A and B sign without noticing the error. Can this contract be reformed?

Answer 47

Although the agreement is within the Statute of Frauds (§ 125), at the request of either A or B, the court will reform the writing to read “$100,000” before determining whether the statute is satisfied. Restatement 2d of Contracts § 156(a)

Question 48

A agrees to sell and B to buy a tract of land for $100,000. In preparing a writing that the parties intend to be a completely integrated agreement, A’s secretary erroneously omits an entire line of the agreement so that no price is stated, and both A and B sign without noticing the error. Can this contract be reformed?

Answer 48

Although the agreement is within the Statute of Frauds (§ 125), at the request of either A or B, the court will reform the writing to include the omitted line containing the agreed price of $100,000 before determining whether the Statute is satisfied. Restatement 2d of Contracts § 156(a)

Question 49

A agrees to sell and B to buy a tract of land for $100,000. They prepare and sign a document that does not, as they both realize, contain the price, although neither party is aware of the legal consequences of this omission. Can this contract be reformed?

Answer 49

Because, apart from the Statute of Frauds, reformation would not otherwise be appropriate, a court will not, at the request of either A or B, reform the writing to include the price. Restatement 2d of Contracts § 156(a)

Question 50

In response to B’s invitation for bids on the construction of a building according to stated specifications, A submits an offer to do the work for $150,000. A believes that this is the total of a column of figures, but he has made an error by his failure to exercise reasonable care in totalling and verifying his figures, and in fact the total is $200,000. If A performs for $150,000, he will sustain a loss of $20,000 instead of making an expected profit of $30,000. B, having no reason to know of A’s mistake, accepts A’s bid. Is this contract voidable?

Answer 50

A’s negligence does not amount to a failure to act in good faith and in accordance with reasonable standards of fair dealing, and he is not precluded from avoiding the contract. Restatement 2d of Contracts § 157(a)

Question 51

In response to B’s invitation for bids on the construction of a building according to stated specifications, A submits an offer to do the work for $150,000. A believes that this is the total of a column of figures, but he has made an error by inadvertently omitting a $50,000 item, and in fact the total is $200,000. If A performs for $150,000, he will sustain a loss of $20,000 instead of making an expected profit of $30,000. B, on finding that A’s bid is the lowest, asks A to check his figures to make certain that there has been no mistake. A states that he has done so although he has not and although such a check would have revealed his mistake. B then accepts A’s bid. Is this contract voidable?

Answer 51

A’s conduct amounts to a failure to act in good faith and in accordance with reasonable standards of fair dealing, and he cannot avoid the contract. Restatement 2d of Contracts § 157(a)

Question 52

A and B agree that A will sell and B will buy a tract of land for $100,000 and that B will assume an existing mortgage of $50,000. In reducing the agreement to writing, B’s lawyer erroneously omits the provision for assumption, and neither A nor B notices the omission. Neither A nor B reads the writing before signing it, although the omission would be obvious to either if he read it. Can this contract be reformed?

Answer 52

Neither A’s nor B’s conduct amounts to a failure to act in good faith and in accordance with reasonable standards of fair dealing, and neither A nor B is precluded from obtaining a decree reforming the writing. Restatement 2d of Contracts § 157(b)

Question 53

A mails B a written offer to sell B a tract of land for $100,000, with a provision that B will assume an existing mortgage of $50,000. B fails to read all of the terms of A’s offer and sends his acceptance without knowing of the provision for assumption of the mortgage. Can this contract be reformed?

Answer 53

B is bound by the provision for assumption. Since B cannot obtain a decree of reformation under the rule stated in § 155, this Section does not apply. Restatement 2d of Contracts § 157(b)

Question 54

A contracts to sell and B to buy a tract of land, described in the contract as containing 100 acres, at a price of $100,000, calculated from the acreage at $1,000 an acre. In fact the tract contains only 90 acres. How might this contract be voidable? How might it not be voidable?

Answer 54

Under the rule stated in § 152, the contract would be voidable by B. If, however, the court decides that this rule will not avoid injustice, it is within the discretion of the court to grant relief on such terms as justice requires. The contract is not then voidable by B. See Illustration 11 to § 152. Restatement 2d of Contracts § 158(c)

Question 55

A contracts to sell and B to buy a tract of land, described in the contract as containing 100 acres, at a price of $100,000, calculated from the acreage at $1,000 an acre. In fact the tract contains 110 acres. How might this contract be voidable? How might it not be voidable?

Answer 55

Under the rule stated in § 152, the contract would be voidable by A. If, however, the court decides that this rule will not avoid injustice, it is within the discretion of the court to grant relief on such terms as justice requires. Compare Illustration 2 to § 152. Restatement 2d of Contracts § 158(c)

Question 56

A sends B two different offers of a contract, one with an option for renewal by A and one without such an option. B signs the one with an option, believing that it is the other one. How might this contract be voidable? How might it not be voidable?

Answer 56

Under the rule stated in § 153, if the court found that enforcement of the contract would be unconscionable, the contract would be voidable by B. If, however, the court decides that this rule will not avoid injustice, it may supply a term, if reasonable, under which B is entitled to avoid the contract only if he accepts the other offer. Restatement 2d of Contracts § 158(c)