Is it mutual mistake, or is it two unilateral mistakes? Please explain your answer.

So now we're going to talk about the second of the phenomena mechanisms, if you will, that you can use to get out of a contract. You've got cold feet, and you just got to get out of this deal. Isn't there something that can happen? Isn't there something your lawyer can do to get you out of the contract? That's what we're talking about.

So what we're talking about here is mistake, not the kind of mistake you made when you decided to take this course. Different kind of mistake. In fact, there's two kinds of mistake that can be grounds for rescission.

One would be unilateral mistake. Unilateral mistake is where you simply make one mistake. You enter into the contract with a mistaken assumption that your decision to do so was based upon. The basic approach to the law of the law here is tough luck. Be more careful next time. There is no remedy for unilateral mistake, unless it is an obvious mistake.

So in fact, I think we could use mistake to go back and look at some of the things we talked about. Remember those cases where the airline put the wrong fare in? Well, maybe they made a mistake. That's a little different than what I've just said, but it's sort of in the same field.

And where it was an obvious mistake, we don't want you to be able to take advantage of someone else's obvious mistake. So it's related to the question that we talked about a bit earlier, but that's unusual.

Certainly the more interesting question has to do with mutual mistake of fact, sometimes referred to as bilateral mistake. Here, both parties have entered into the contract, making a false, factual assumption. Both parties made the same mistake.

The black letter law is that the party that is being harmed by the mistake, the party that is disadvantaged by the mistake, can avoid the contract. It's voidable, if you will, at the option of that party. The other party is bound. It's not void. It's voidable.

OK, so let's-- come on, guys, let's play with this. Let's say I've got a car to sell. I've got this old Honda, and it's time to get a new car. So I offer it to you for sale, Amber. And you come and look at it. It's in the parking garage, and you drive it. And you kick the tires, and you slam the door. As I said, a typical buyer, and it looks pretty good.

So we leave the car in the garage, and you come back to my office. And some time much later, we agree upon a deal for you to buy the car for $5,000. Now the strangest thing has happened. It seems that there is a hippo at the National Zoo that has been a little restless lately. I don't know what's going on with this hippo. But somehow or other, this hippo is having amorous thoughts, shall we say.

And the hippo, somehow, gets out. And you understand the geography. He gets out of the National Zoo, he comes-- like no one's going to notice this hippo-- lumbering up Connecticut Avenue, makes a left on Nebraska, somehow walks down, crosses Ward Circle, and arrives at the American University campus.

He wanders into the garage, where my car is parked. And, well, how to put this gingerly, somehow my Honda speaks to him. And without too many details, [SIGHS] let's just put it this way. The rear end of this car is never going to be the same.

[LAUGHTER]

He has had his way with this car, and you don't want the car anymore. It has been besmirched, definitely besmirched. It's damaged goods.

Now when we sat down and made the contract, this already had happened. We didn't know about it. What you had in your mind was the car as you'd last seen it. What was in my mind was the car as I had last seen it. So we assumed the car was not damaged. So the question is, Amber, are you going to be bound to buy this car in its destroyed, perhaps besmirched, condition?

No.

No? Why not? I don't want the car.

Well, it's a bilateral mistake. We are both mistaken about the condition of the car.

We are both mistaken about the condition of the car. And we both made the same mistake concerning the car. That is, we believed it to be in its pristine condition, its virgin condition, if you will.

OK. OK. Good. Good. Good. I think that's probably right. Pretty easy. Pretty easy. Well, let's look at another case. This case is based upon a famous case called Raffles versus Wichelhaus. You may hear about this sometime?

Anyway, this case-- let's just play with it. We don't have to get it exactly right. [? Quinton, ?] I'm interested in selling to you a shipload quantity of cotton to be shipped "ex Peerless" from Bombay. What I'm doing here is saying the term "ex Peerless," that's a quote-- means on a ship by the name of Peerless.

So I'm agreeing to buy, and you're agreeing to sell a shipload quantity of cotton to be shipped out to me on the ship by the name of Peerless, to be sailing from Bombay. Bombay, the old name from Mumbai. It's an old case.

So here's the problem. There's not one ship by the name of Peerless, I should say. But there are two ships with the same name-- one ship that is sailing in about a month and another ship that won't be sailing for nine months. I only know of one ship. You only know of the other ship.

I don't want the cotton when you're going to ship it. And you can't get me the-- you see the problem? Do we have a contract? And is it fully binding on me. I don't want to buy the cotton when that other ship's coming in. What's going on here?

You would think that you don't have a binding contract, because we both made a mistake as to how we thought it was going to get there. There being two boats by the same name leaves room for that type of mistake.

Sure. Neither of us knew that there were two ships. And we each had in mind a different ship.

But did you make the same mistake or a different mistake?

Yeah. Yeah, that's a problem. It may be more of an academic problem than a practical problem, because if it's a mutual mistake we know, it is voidable. In fact, you've raised an interesting point. Why are there two mistakes? Explain. How is this different than my Honda hippo problem?

Because you each made a different mistake in terms of what ship you thought was coming in.

Yeah. In the earlier case, we both had in mind the very same ship. Here, we have in mind different ships. Should that make a difference? I think that because we both made the same mistake as it regarded the transport of the cotton, that kind of overrides, necessarily, the ship.

Well, you could argue, I suppose, and maybe this is what you're saying, that what we've got here is different ideas about the ship. You've got in mind one ship. I got in mind the other ship. We've each made a mistake, but there are two mistakes. Count them, two unilateral mistakes.

So we don't have the same state of mind. We have a different state of mind. In point of fact, this is a real case.

And there's been a lot written about it. Probably not of a practical importance, because either way, we're going to conclude that I don't have to buy the cotton. The deal is off. Now is it off because we had a mutual mistake? Or-- well, if you describe the mutual mistake as the fact that there are two ships, I guess it was mutual. But that really isn't what the deal is.

Others would argue, no, what we have here, as you said, would be two unilateral mistakes. So in this case, you could argue that it's not just avoidable situation, where there is mutual mistake of fact. But in fact, we didn't have a contract at all, that we never had an agreement because we each had in mind a completely different understanding.

In other words, there was no meeting of the minds, although we've already discussed whether you really need a meeting of the minds. What we had here are two ships sort of like two ships passing in the night, a failure to come together on an agreement, that maybe it's not voidable because of mutual mistake of fact. But maybe it's voidable because it was never offer and acceptance. It's interesting. It looked like it was offer and acceptance. But in reality, the parties really did this.

Again, kind of interesting. I guess you really have to ask yourself, what is this? What do you guys think? Is it mutual mistake? Or is it two unilateral mistakes?