CHAPTER 4.

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OFFER AND ACCEPTANCE.

(2) VALIDITY OF ASSENT THEREIN.

Sec. 33. INTRODUCTION.

We have discussed what will constitute offer and what acceptance. In so doing we have assumed a true contractual intent on both sides without mistake as to subject matter, or any undue advantage taken by one side over the other by way of fraud, coercion or undue influence. In other words we have looked only to the words used or acts done indicating offer and acceptance without inquiring whether there may be extrinsic circumstances which prevent those words or acts from expressing the true contractual intent of the parties. We will find that we may group these circumstances under the following headings:

(A) Circumstances defeating contractual (mistake and deception as to act done).

intent

(B) Circumstances of unfairness giving party imposed on a right to disaffirm the contract (fraud as to consideration or in the inducement, duress and undue influence).

A.

Extrinsic Circumstances Defeating Contractual Intent. Sec. 34. FRAUD IN THE INCEPTION OR EXECUTION. A fraud practiced by one person upon another, whereby the other's seeming assent is procured to a con

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tract which he in reality never agreed to, prevents a contract from being formed. This is variously called fraud in the inception, in the execution, and in the procurement.

Suppose A is sued upon a note, to which his signature is attached, but which he does not know he has signed, having been misled by the payee into believing he was signing an agreement for an agency. Is he bound on the note? A contract signifies an agreement, and clearly there has not been such an agreement in this case. We have heretofore considered that one may sign an instrument and still be bound thereon, though he has not read it, but this is upon the theory that he has been willing to take a chance on what it contains, and no other rule would be a workable one. But in those cases there has been no misrepresentation as to what the instrument contains. We are now considering a case of fraud by which the content of the alleged contract is misrepresented. The rule is that such a contract is void.

Example 28. Plaintiff was injured in a railroad accident. While in a dazed condition and about an hour and a half after the accident, he was conducted into the superintendent's office, and told that the railroad company was willing to pay the sum of $17.00 for the injury to his hat and trousers, and asked him to sign a receipt for Plaintiff was seriously injured and brought suit. It turned out the paper he signed was a release in full for his injuries. Held, that it was a question for the jury whether he was defrauded or not, and a jury's verdict that he had been so defrauded, would not be disturbed.44

In these cases the contention is sometimes made that it is the defendant's own negligence that he did not read 44. Bliss v. N. Y. C. & H. R. Co., 160 Mass. 447.

what he signed, and therefore ought not to be permitted to avoid it. In answer we may say, first, that in many cases there is no ground for claiming negligence, as in the case above, where the party was dazed, or in cases where the other party by some excuse or device prevents him from reading. And, second, that in a contest between one who has been guilty of fraud, and one who has been merely negligent, the justice ought to be with the latter, or in other words that it ought not to be for the court to assist one guilty of fraud to recover the gains thereof, on the ground that his victim was careless.45 This is therefore regarded as the better rule, although the contrary rule has been laid down in some cases, and a negligent person held to be bound to a contract which he never really assented to, by reason of the fraud of the other.

Sec. 35. MISTAKE. A mutual mistake of fact, (a) as to the existence of the subject matter, (b) as to the identity of the subject matter, (c) as to terms employed, prevents the existence of a contract, but mistake as to value or quality, does not affect the validity of the contract.

The subject of mistake in contract has occasioned a great deal of difficulty and a diversity of views, and what is said here will be an attempt to formulate that part of the subject upon which there is a general agreement.

(a) Mutual mistake as to existence of subject matter. This prevents contract.

Example 29. Riegel had a policy of insurance upon the life of his debtor. The debtor disappeared and Riegel

45. Maxfield v. Schwartz, 45 Minn. 150, 47 N. W. 448.

kept up the premiums, but finding the matter burdensome, took out a paid up policy for a less sum, in exchange for the old policy. At the time of this change, the debtor was dead, unknown to both parties, and Riegel had the right to recover on the former policy. Held that the mistake prevented the new policy from taking the place of the old and that it would be set aside and a recovery allowed on the faith of the old policy.46

(b) Mutual mistake as to the identity of the subject

matter.

If one person has in mind one thing and the other has in mind another thing, and each attempts to contract as to thing he had in mind, there is no "meeting of the minds" and no contract results.

Example 30. A has a quantity of hemp and also tow for sale all done up in bales, and identified by numbers. The auctioneer made out a catalogue describing the bales by numbers and not disclosing the difference in the commodities. B examined some of the bales of hemp, but not of tow. At the auction the auctioneer offered a quantity of tow, describing it by the number of the bale, and B bid, intending to buy hemp. Held that there was no contract because of the mistake.47

(c) Mutual mistake as to terms employed.

Mistake as to terms employed is not a mistake that ordinarily can be set up by a party to a contract, if we eliminate the cases of mistake induced by fraud. Those cases we have already considered, and are not to be 45. Riegel v. Amer. L. Ins. Co., 153 Pa. 134.

47. Scriven Bros. v. Hindley & Co., L. R., K. B. 1913, p. 564.

thought of as cases under the heading of mistake, but rather as cases under the subject of fraud.

If, there being no fraud present, a person will not read a contract, he will be bound by what it contains.47a Any other rule, as has been explained, could not be a workable rule, for the reason that there is really no test whereby we could determine the actual fact, and because also, such a rule would encourage laxity.

Example 31. A landlord presents a lease for B, his prospective tenant, to sign. B signs it without reading it. B is bound by the provisions of the lease although he neglected to read the lease, there being no fraud on the part of the landlord.

If a document as finally written contains a scrivener's error, as where the parties agree to a one year lease, and the typist in preparing makes it ten years, a court of equity would, upon that fact being proved, reform the instrument to meet the true intention of the parties.

Mistake as to Terms of Oral Contract. If there is a mutual mistake as to the terms of an oral contract, and it is evident to the court that there was such a mistake, and if the party claiming the mistake has not acted in any way to prejudice the other, there is no contract.48

(d) Known Mistake as to Terms Taken Advantage of by the Other Party.

If one party makes a mistake as to the terms of the contract which the other party knows he has made and takes advantage thereof, there is no real meeting of minds, and a contract does not result.

47a. Bateman v. Small, 100 S. E. 573 (Geo.). 48. Rupley v. Daggett, 74 Ill. 351.