Chapter 8 – Textbook
Even if we realize afterwards that a contract was not a good idea, we can not legally
justify avoiding the obligations.
Equitable relief – a discretionary remedy first developed by courts of equity to undo an
injustice. Court recognizes a mistake and provides relief.
1. Mistakes about the Terms
a. Words used Inadvertently
If it was reasonable for the second party to rely on them and enter into the
contract, then the terms of the contract are binding on the first party,
consequences of the error fall on the one who caused it.
If its is clear to a reasonable bystander that the first party made a mistake in
expressing the terms of the contract (price is to low or unrelated to the
negotiation) the contract is voidable by the first party.
b. Error in Recording an Agreement
A agreement can be reached in oral or vague writing, but sometimes when
being written formally, a term may be left out or something changed. The
party that will benefit from the mistake may insist that the final version
cannot be changed. The party claiming it was improperly arranged may file
Rectification: correction of a written document to reflect accurately the
contract made by the parties. They must prove the following:
a. the court is satisfied that there was a complete agreement between
the parties, free from ambiguity and not conditional on further
b. The parties did not engage in further negotiation to amend the
c. The change in the written document may be fraudulent or innocent.
d. When the document was signed the defendant knew or should have
known of the mistake and the plaintiff did not
e. Any subsequent attempt to enforce the inaccurate written document
is equivalent to fraud
2. Mistakes in assumptions
a. About the Existence of the Subject-matter of a Contract
Applies to the sale of goods, incorporated in the Sale of Goods Act.
“Where there is a contract for the sale of specific goods and the goods without the knowledge of the seller have perished at the time the
contract is made, the contract is void.”
If the seller is aware that the goods had perished, the attempt to sell then
would be fraudulent and the buyer could recover damages by suing in
tort for deceit.
b. About the Value of the Subject-matter: Allocation of Risk
When a risk is involved with the agreement, when the subject matter of a
contract is still in existence but it qualities are radically different.
Agreement for the exchange of stocks valued a $5, where A (buyer) believes
value will rise; B (seller) believes value will fall. If unknown to either, the
court will not grant relief to the party adversely affected, it is a risk expected
in the contract.
c. The Challenge of Achieving a Fair Result
A courts willingness to grant relief will be influence by its ability to create a
result that s