Justification for Nonperformance - Mistake, Impossibility, Impracticability and Frustration of Purpose Flashcards
Mistake Def
Belief that is not in accord with the facts
Mutual Mistake
where both parties made the same erroneous assumption (as opposed to unilateral mistake whereonly one party made an erroneous assumption)
Elements that a party must prove to succesfully claim the defense of mistake:
- must be mutual mistake
- mistake must be present at the time of K execution
- mistake must be a basic fact, not collateral fact
- has material effect on the exchange
- party seeking relief did not bear the risk
- evidence must be clear and positive
Basic Mistake v Collateral Mistake
Basic - goes to the nature of the consideration itself (is a “fundamentally different creature”).. Basic mistake must logically be a mutual mistake
Collateral - mistake of value/$$
Party bears the risk of a mistake when:
- the risk is allocated to him by agreement of the parties, or
he is aware, at the time the contract is made, that he has only limited knowledge with respect to the facts to which the mistake relates but treats his limited knowledge as sufficient, or
the risk is allocated to him by the court on the ground that it is reasonable in the circumstances to do so.
Barren Cow Case
Cow that produces milk is a “fundamentally different creature”, thus basic mistake of fact
Effect of “as is” clause
Unless there was fraud, party bears risk
Conscious Ignorance Doctrine????
where both parties agreed they did not know whether the assumptions were erroneous or not. If the K itsel fconsidered the possibility of mistake and allocated the risk agaist one of the parties, that party will lose (b/c party consciously accepted risk) unless there is fraud.
Remedy for mistake
Recission
Affirmative Defense of Impossibility BS for test
Events can occur to change the performance of a Kin such a way as to make performance of the K imossible by one or both parties (e.g MJ dies)
Impossibility applies where the parties have not allocated the risk of the contingency by their agreement, to relieve the parties of their obligations when a contingency occurs that makes contract performance impossible.
Williston on Impossibility
the question is whether an unanticipated circumstance has made performance of the promise vitally different from what should reasonably habe been within the contemplation of the parties when they entered into the K.
Impossibility Def:
When a person on thing “necessary for performance” of the K dies or is incapacitated, is destroyed or damaged, the duty of performance is accordingly excused.
Must prove literal impossibility or “objective” impossibility. i.e. no one could do it.
The supervening event changed the nature of the subject matter and the non-occurrence of that event was a basic assumption of the K
Remedy for Impossibility
Recission. Any payments will have to be returned.
Impracticability Def:
Supervening event occurred after the K was finalized that changed the nature of the subject matter of the contract. The supervening event makes the subject matter of the K a fundamentally different creature
Affirmative Defense of Impracticability BS for test
With impracticability, the K may not be strictly impossible to perform bu a a supervening event occured rendering it a fundamentally different creature.
Must be a basic change/not a collateral change.
Nonoccurrence of event was a basic assumption of K
No fault of D
As a matter of law, economic downturn is not impracticable
Decided as a matter of law
