Chapter 6. Mistake (151-158)

Question 1

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 1

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

Question 2

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 2

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 3

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 3

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 4

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 4

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

Question 5

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 5

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

Question 6

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 6

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

Question 7

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 7

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 8

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 8

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 9

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 9

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 10

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 10

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 11

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 11

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 12

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 12

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

Question 13

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 13

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

Question 14

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 14

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 15

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 15

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

Question 16

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 16

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 17

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 17

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 18

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 18

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

Question 19

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 19

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

Question 20

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 20

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 21

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 21

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 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 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 22

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 23

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 23

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 24

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 24

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 25

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 25

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 26

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 26

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 27

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 27

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

Question 28

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 28

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 29

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 29

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

Question 30

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 30

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 31

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 31

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 32

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 32

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