Contracts & ExecutionQuestion 863 of 1632

A mutual mistake of a material fact by both parties at the time of contracting may allow:

a.Automatic tripling of the agreed contract price
b.Rescission, since there was no meeting of the minds
c.Only punitive damages against the mistaken party
d.The contract to continue, with no remedy at all

Explanation

Civil Code §1577 defines mistake of fact as a mistake not caused by the neglect of a legal duty, consisting in unconscious ignorance or forgetfulness of a material fact, and §1567 lists mistake among the defects that make consent unreal. §1689(b)(1) makes a contract entered into through mistake rescindable, with §1692 requiring the rescinding party to restore what it received. The mistake must be MUTUAL and material: a unilateral mistake generally binds the mistaken party unless the other knew of it or caused it. (d) states the rule for exactly that unilateral case, which is why it reads plausibly. (c) confuses an honest shared error with wrongdoing; punitive damages under §3294 need oppression, fraud or malice and are unavailable on a contract claim. (a) invents a multiplier.

Law Reference: Civil Code §1567, §1577, §1689(b)(1), §1692

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