Monday, March 8, 2010
7 - Contracts – Formation (Defenses-Mistake)
Contracts – Formation (Defenses-Mistake)
PLEASE NOTE THAT THE FOLLOWING IS TAKEN FROM SOME OF MY CLASS NOTES, SOME OF WHICH IS MY OWN PERSONAL WORK AND SOME OF WHICH BELONGS TO CONCORD LAW SCHOOL. IT IS POSTED TO HELP MY IL STUDENTS IN PARTICULAR. IT CANNOT BE DISSEMINATED WITHOUT EXPRESS, WRITTEN PERMISSION.
Last time in contracts, we looked at the defense of capacity. Now we move on to mistake.
A. Mutual Mistake – Neither party knew of the mistake
1. There is no contract if the mistake goes to the "basic assumption of the parties in making the agreement that has a material effect on the contract."
2. Exception: if both parties had assumed the risk for their own ignorance.
B. Unilateral Mistake – Only one party knew of the mistake.
1. The general rule is that the contract is enforced. This is because of the objective theory of contract so that we can rely on the objectively-manifested intentions of the other party.
2. A unilateral contract would be enforceable unless the non-mistaken party had known or should have known of the mistake or, in a minority of states, to avoid injustice.
C. Reformation - If there is a mere clerical mistake, then the court would re-write (reformation) the document to reflect the actual agreement.
Next time in contracts we’ll look at the defense of Duress.
Professor Doug Holden
© 2010. Douglas S. Holden. All Rights Reserved.