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Chapter 8 Impeaching Contracts.docx

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Department
Accounting
Course
ACTG 2P40
Professor
P.Maloney
Semester
Fall

Description
Chapter 8 Impeaching Contracts: Mistake Mistake in the “eyes of the law”  We must not confuse a „Legal Mistake‟ with „Mistake‟ in its general more non legal meaning such as “ I made a mistake in not putting my jacket on” such mistakes in judgment do not legally justify avoiding ones legal obligations under a contract. The Law recognizes 2 meanings of Mistake 1) Mistake in the TERMS of a contract. 2) Mistakes in the ASSUMPTION of a Contract. The law will grant relief for the following Mistakes. 1) Mistakes about the Terms a) Words used Inadvertently  If a party uses the wrong word inadvertently in stating the terms of a contract then the contract is void at the option of the party who used the word wrong- the wrong word must have caused a material misfortune and clearly unreasonable.($10----$500) b) Errors in Recording an Agreement  Once parties have already reached an agreement and later intend to put the contract into a formal written contract and find that an error was made in the recording.  Pending if the error is material enough the court it most cases will grant RECTIFICATION (fix the contract) RARE!!  In order to get rectification you must prove 1) there was a clear complete agreement accomplished with out any ambiguity 2) the parties didn‟t engage in any further negotiation 3) the error in the recording is in fact an error any clear to see was an honest mistake ( if looks fraudulent will not grant rectification ) c) Misunderstanding about the Meanings of Words  When parties both have a misunderstanding of the meaning of a word in a contact.  In some cases both parties are equally reasonable or unreasonable as to the mistake in the meaning of the word ----- Peerless Boat with Cotton  In this case the courts will set the contract aside because of the mutual mistake BUT if one party is misunderstood diff outcomes in court. 2) Mistakes Arising from Assumptions a) Mistakes as to the Existence of the Subject Matter  A mistake made when both parties believe that the subject matter exist when it fact it does not( fruit gone bad) both parties are unaware of the damages and at the time the contract was entered into the goods were fine – the courts will set the contract aside. ( unless
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