whenever an element of doubt or risk is known to enter into the bargain, the risk assumed cannot be relieved against either at law or in equity. It is true, nevertheless, that simple justice calls for a measure of relief against mistake in certain classes of cases. The rules which have been developed by the application of moral sense to particular cases involving mistake are discussed in the following sections. The effect of mistake is a question that comes up for consideration from the standpoint of equitable principles in various ways, and the rules relating to the subject vary somewhat according to the nature of the particular relief sought by the mistaken party. When is mistake a defense to a suit for the specific performance of a contract? When is it a ground for rescission of the contract? When is it the basis of a duty to make restitution on the doctrine of unjust enrichment? When is it a ground for the rectification of a written agreement? Does mistake of law afford a basis for equitable relief? These are the questions now to be considered in the order stated. $166. Refusal of Specific Performances on Ground of Mistake. Specific performance of contract is an extraordinary remedy, given only in the sound discretion of the court, and a court of equity is inclined to refuse this remedy, if in addition to a mistake by the defendant, there is in the situation an element of substantial hardship to the defendant.' So also if the complainant was guilty of dishonorable conduct at the time of the transaction, he may be denied the special remedy of specific performance. This would be true, for example, if the complainant at the time knew of the defendant's mistake and yet made haste to "snap up the offer."" When the defendant's mistake is due to his own carelessness, this fact is taken into account in the administration of the discretionary remedy of specific performance. $167. When Rescission Is Granted. It is only in relatively Mansfield v. Sherman (1889), 81 Me. 365. Webster v. Cecil (1861), 30 Beav. 62. few instances that the mistaken party is content with the measure of relief just discussed. In most cases, of course, he seeks to be relieved entirely from the transaction. In other words, he desires a rescission of the bargain and is not content merely to be free from the special obligation of specifically performing his agreement. Various courses are open to one who is entitled to rescind the bargain. He may invoke the assistance of equity to have the agreement declared void, and the instrument embodying it cancelled; or he may wait until he is sued by the other party, and then set up his equity for the rescission of the transaction by way of defense. In the latter case also the remedy was originally sought in equity; but in modern times courts of common law have, in many instances, adopted the equitable principles of rescission, especially whenever chattels are involved. The same facts which may be a bar to the remedy of specific performance are not always a ground for the rescission of the transaction. Disaffirmance of a contract which is binding at law is a remedy which should always be granted only under careful restrictions. What are the special prerequisites to this mode of relief when it is sought on the ground that mistake has made the bargain unfair and unjust? First of all, it must appear that the mistake relates to a matter actually contracted about. The line of division is usually stated to be between a mistake as to something intrinsic, such as the existence of the subject-matter of the agreement, and a mistake as to a matter which was extrinsic or collateral to the bargain. Errors of the latter kind include, as a general proposition, errors of judgment as to the attributes, the value or quality of the subject-matter of the bargain. Thus, in a sale of a specific chattel, a buyer who has neither an express nor an implied warranty of quality to fall back upon rarely has a case which entitles him to avoid the bargain. "The remedy of rescission as such is subject to certain conditions which are equally applicable whether it be given to the injured party on the ground of mistake or misrepresentation, duress, or undue influence. See §185, infra. $168 HECHT v. BATCHELLER. Supreme Judicial Court of Massachusetts, 1888. [147 Mass. 335.] [Plaintiffs bought of defendants a promissory note unindorsed by defendants. Unknown to the parties, the maker of the note had made a general assignment for the benefit of his creditors two hours before this transfer. Relief was denied on the ground that the "mistake was not as to the subject-matter of the sale but as to its quality." Per MORTON, C. J.] $169. Essential Error; Mutual Mistake.-Whether an error is one of the kind which is intrinsic, as it is called, should be recognized as a question of degree. On principle, and from the point of view of practical affairs, the inquiry should be: was the mistake actually the basis of the agreement as distinguished from matter of inducement for entering into the agreement? In other words, was the mistake such that it went to the essence of the contract and not merely to the motive? In the second place, it has been frequently laid down that in the case of agreements, rescission will not be granted unless the mistake which went to the essence of the agreement was a mutual mistake. If a unilateral mistake was caused by, or known to the other party at the time the agreement was made, the courts will decree rescission, but if the unilateral mistake was unknown to the other party, the language of many cases supports the doctrine that the innocent party should not be deprived of the benefit of his bargain. Recently, however, there is a tendency to hold that it may be inequitable to allow an agreement to stand even when the unilateral mistake was unknown to the other party. Such was the decision in a recent Minnesota case' where a contractor's offer was lower than he intended because of his inadvertent omission to take account of an important item. Although the other party accepted the offer without knowing of the mistake, its acceptance of the offer did not lead to a change of position on its part, and on these facts the court decreed rescission and cancellation. $170. Recovery of Money Paid Under Mistake.-Restitution St. Nicholas Church v. Kropp (1916), 135 Minn. 115. in specie is peculiarly a remedy for a court of equity—the one court which can act in personam; restitution in value, on the other hand, is a mode of relief which courts of common law have, broadly speaking, long been able and willing to give against the defendant who is retaining a benefit which equity and good conscience demand should be restored to the plaintiff, whether the benefit consists of money paid or the value of services rendered or of chattels delivered. The principle that restitution should be required of one who received a benefit the retention of which is unjust, applies when a defendant has received the value of labor and materials furnished him under a mistake of the kind which renders the agreement wholly vaid.' The principle, however, finds its most frequent application in situations in which a plaintiff has paid money under a mistake of fact. An English judge once said: "With respect to the argument that money cannot be recovered back, it seems to me, that wherever it is paid under a mistake of fact, and the party would not have paid it if the fact had been known to him, it cannot be otherwise than unconscientious to retain it." Although the obligation to make restitution in such cases is commonly enforced today by means of a contract remedy (as distinguished from a remedy in equity), it is, of course, an obligation which is not at all based upon a promise or mutual assent of the parties and is, therefore, now commonly called a quasi contract. The basis of the right in this kind of case is not the element of pure mistake but the obvious principle of justice that a person who has received from another a benefit, the retention of 'See, for example, Turner v. Webster (1880), 24 Kan. 38 and Vickery v. Ritchie (1909), 202 Mass. 247. In the latter case, the plaintiff recovered the fair value of his labor and materials, a sum very substantially in excess of the amount by which the market value of the defendant's property was increased. Rolfe, B., in Kelly v. Solari (1841), 9 Mees, & W. 54, 59. The statement quoted is too sweeping, as will appear in the subsequent discussion. For a diverting story which supplies material for analysis and an opportunity for an application of the rules relating to mistake, see the chapter on "The Ransom of Mack" in O'Henry's "Heart of the West." gorge. which is against good conscience, should be compelled to disThis is evident from the fact that no recovery is permitted if the money was equitably due to the defendant. For example, a plaintiff who paid because of a mistake of fact as to whether the period specified in the statute of limitations had expired, cannot recover back his payment if he justly owed the debt. Is another illustration of this principle supplied by the rule that there can usually be no recovery by banks or drawees of bills of exchange who pay out money to innocent holders of instruments to which the drawer's name has been forged? King's Bench, 1762. [3 Burr. 1354.] [Drawee sued indorsee, a holder in due course, to recover money paid under mistake as to the genuineness of the drawer's signature. Several reasons were assigned by Lord Mansfield in support of the decision that the drawee could not recover. One was expressed by him as follows: "If there was no neglect in the plaintiff, yet there is no reason to throw off the loss from one innocent man upon another innocent man."] §172. The Principle of Unjust Enrichment.-While the rule of Price v. Neal is supported by the overwhelming weight of authority, the true explanation of the rule is a subject which is in great dispute.' From the standpoint of quasi contracts it seems impossible to formulate a theory of the case under which the several allied rules of law can all be explained in a mutually consistent way. It seems to be the prevailing view of the judges that "probably the rule was adopted from an impression of convenience rather than for any more academic reason." There are, however, unquestionably other situations in which a plaintiff who has paid money under a mistake is denied a recovery owing to a lack of equity in his favor. Such are the cases in which a defendant has been induced by reason of the pay 'For an able discussion of the conflicting theories on this point, see ch. V. of Woodward, The Law of Quasi Contracts. Holmes, C. J., in Dedham Nat. Bank v. Everett Nat. Bank (1901), 177 Mass. 392, 395. See also the remarks of Mitchell, J., in Germania Bank v. Boutell (1895), 60 Minn. 189, 193. |