- Should the court allow the buyer to avoid the contract?
Answer: No, because the buyer treated his limited knowledge of the quantity as sufficient and thus bore the risk.
Under the law of mistake, a party bears the risk of a mistake when he is conscious, at the time of contracting, that he has only limited knowledge of the facts and treats that knowledge as sufficient. Here, both parties knew the gravel pit had not been surveyed and that the quantity was uncertain, yet the buyer priced the contract on an assumed figure. The buyer therefore assumed the risk that the quantity would be less. A and B ignore that risk allocation; D is contrary to the stated facts, which say both parties believed the pit contained at least 50,000 tons.
- Which of the following is correct?
Answer: The seller may rescind because the parties were mistaken about the identity of the painting.
Mutual mistake makes a contract voidable if the mistake concerns a basic assumption on which the contract was made and has a material effect on the exchange. The parties' belief that the painting was a copy was a mistake about the very identity of the subject matter, not merely its market value. Because the mistake was material and no risk was allocated, the seller may rescind. B mischaracterizes the mistake as one of value; C invents a risk borne by the owner; D incorrectly requires the buyer's knowledge, which is relevant only to unilateral mistake.
- Who prevails?
Answer: Buyer may enforce because Seller's mistake was unilateral, Buyer had no reason to know of it, and enforcement is not unconscionable.
Seller's mistake about acreage was unilateral because Buyer formed no belief about the acreage and had no reason to know of Seller's error. A unilateral mistake makes a contract voidable only if enforcement would be unconscionable or the other party knew or had reason to know of the mistake. Neither condition is present. Acreage can be a basic assumption, but that alone is insufficient for unilateral mistake. Buyer's purpose is not the legal test, so D is wrong.
- In a suit between the parties, what is the result?
Answer: No contract exists because the parties attached materially different meanings and neither knew or had reason to know of the other's meaning.
When parties attach materially different meanings to a contract term and neither knows or has reason to know of the other's meaning, there is no contract. Here, 'the cotton cargo arriving on the ship Peerless' reasonably referred to two different cargoes, and neither party knew there were two ships with that name. Thus neither party's meaning controls. This is not a case of unilateral mistake or a voidable contract; the manifestation of assent never attached to the same subject matter.
- Which statement best describes Subcontractor's liability?
Answer: Subcontractor may avoid because General Contractor had reason to know of the mistake.
Under the rule for unilateral mistake, the mistaken party may avoid the contract if the other party had reason to know of the mistake. A bid far below the next-lowest bid, plus the project manager's explicit remark, gave General Contractor reason to know. Actual knowledge of the precise omitted item is not required. Unilateral mistake can be a ground for avoidance, so the absolute statement in A is wrong. Because General Contractor had reason to know, unconscionability need not be shown, making D wrong.
- What is the quantity under the contract?
Answer: 10 long tons, because the buyer knew or had reason to know the seller's meaning.
If one party knows or has reason to know the meaning attached by the other, and the other does not know or have reason to know the first party's meaning, the contract is interpreted according to the meaning of the other party. The buyer knew the seller always used long tons, so the seller's meaning controls. B incorrectly favors the buyer; C fails because the buyer's knowledge supplies a meaning; D is a rule of construction that does not override actual knowledge.
