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Ch 9 - Basic Assumptions: Mistake, Impracticability, Frustration of Purpose

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1

Sumurel v Goodyear Tire & Rubber Co?

Goodyear's lawyer sent the wrong calculation for damages to Sumurel's lawyer. Sumurel's lawyer accepted the offer, knowing it was mistake and sued for the amount.

RULE: Generally, a material mistake made by one party to a contract, which is known or should be known by the other party, allows the mistaken party to avoid the contract.

2

Stees v Leonard? (quicksand case)

Leonard attempted to construct a building for Stees but it collapsed twice due to being on quicksand. Leonard refused to do any more work and Stees sued.

RULE: If a person enters into an express contract to perform, he is bound by that contract unless he can establish absolute impossibility of required performance. He will not be excused on the basis of unforeseen hardship or difficulty which does not rise to the level of impossibility. Quicksand is not an impossibility.

3

Renner v Kehl? (jojoba case)

Renner contracted to purchase land from Kehls for jojoba cultivation. Jojoba cultivation requires a sufficient water supply and both parties knew this. After down payment, Renner tested the property and found there was insufficient water. Renner sought recission of the contract.

RULE: (1) A contract may be rescinded where there is mutual mistake with regard to a material fact which is an essential component and condition of the contract.
(2) Consequential/Reliance damages are not available when a contract is voidable based on unilateral or mutual mistake. Instead, restitution damages are granted by way of part performance or reliance.

4

Wood v Boynton? (diamond in the rough case)

Boynton offered to buy a stone from Wood for $1. Wood accepted but later found out it was an uncut diamond worth $700. Neither party knew value of diamond beforehand. Wood sued.

RULE: A seller may rescind the contract of a good if (1) buyer was fraudulent in procurring the item or (2) if seller made a mistake in delivering a good that was not the good sold.
Because neither party knew the value of the diamond before and because the good delivered was the same good intended, there was no mistake.
Seller had limited knowledge, meaning she was consciously ignorant of the value of the stone, so risk if allocated to her.

5

Sherwood v Walker? (Barren Cow Case)

Sherwood contracted to buy a particular barren cow from Walker, a cattle-breeder, for $80. Walker discovered cow was not barren and refused to sell her because she was now worth $750. Both parties believed she was barren beforehand. Sherwood sued.

RULE: When a contract is made based on the mutual mistake of the parties that relates to a material fact such as the subject matter, price, or some other fact which materially affects the agreement, the parties may rescind the contract once they learn of their mistake.

6

Mineral Park Land Co v Howard? (gravel underwater)

Howard agreed to remove 114,000 cubic yards of gravel for Mineral Park. Howard only removed 50,000 cubic yards because the rest was underwater and could not be extracted without great expense and delay. Mineral park sued.

RULE: Performance of a contract is not required where performance would be so expensive as to render it impracticable.

7

Taylor v Caldwell? (Music Hall on fire)

Caldwell owned a Music Hall and rented it out to Taylor. After contract was formed, but before the concert, the hall was destroyed by a fire. Taylor brought suit to recover reliance damages for money spent advertising and preparing for the concert.

RULE: No reliance damages. In contracts in which performance depends on the continued existence of a given person or thing, a condition is implied that the impossibility of performance arising from the perishing or destruction of the person or thing shall excuse performance by both parties. The Music Hall's destruction excused performance on both sides.

8

Transatlantic Financing Corp v United States? (Suez Canal case)

Transatlantic agreed to ship wheat to Iran for United States. The Suez Canal was closed so Transatlantic had to sail another way around. Transatlantic sued for the additional voyage cost, claiming impossibility of performance.

RULE: Defense of Impracticability requires that (1) something unexpected occur, (2) the risk of the occurrence is not allocated either by agreement or custom, (3) Occurrence of the contingency must have rendered performance impracticable.
Here, Transatlantic had the risk because it was in a better position to know of the Suez Canal. Supervening impracticability.

9

Krell v Henry? (cancelled coronation case)

Krell promised a room to Henry for the upcoming coronation of the King of England. In exchange Henry gave Krell 25 pounds and promised to pay 50 more later. The coronation was cancelled and Henry refused to pay the 50 remaining pounds. Krell sued.

RULE: When a condition that is not expressly mentioned in a contract can nevertheless be implied from extrinsic evidence as being understood by both parties to be the subject matter of the contract, the nonoccurrence of the condition may excuse nonperformance of the contract by both parties. The purpose of the contract was frustrated.

10

Swift Canadian Co v Banet? (F.O.B. Toronto)

Parties agreed to sell lamb pelts FOB Toronto. U.S. gov made a law that prevented the lamb pelts to be transported into the U.S. Both parties refused performance.

RULE: (1) When a contract indicates that goods are to be delivered FOB, a rebuttable presumption arises that the title and risk of loss passes from seller to buyer when the goods are loaded for shipment
(2) Although purpose is frustrated, it isn't substantially frustrated because there were alternatives.

11

Chase Precast Corp v John J Paonessa Co? (median barriers for Massasschusetts)

The State hired Paonessa to hire a subcontractor to supply median barriers. Paonessa hired Chase to do so. State deleted the median barriers item from the contract with Paonessa after Chase produced one-half the order and had delivered most to the site. Chase sued Paonessa to recover its anticipated profit.

RULE: When an event neither anticipated nor caused by either party destroys/frustrates the object or PURPOSE of the contract, the parties are excluded from further performance.

Paonessa could claim frustration of purpose as a defense and Chase had the risk allocated to him because he knew the industry practice and it was foreseeable that the State would no longer need the barriers.

12

Young v City of Chicopee? (Burning bridge and unused lumber)

Young was contracted to repair a bridge by City. He commenced work and brought lumber to the site to use later. A fire burned the bridge and Young sued City for work and materials furnished (restitution) and the destroyed unused lumber (reliance).

RULE: Where a contracting party only partially performs the contract through no fault of its own, an implied contract arises which obligates the other party to pay for the value of work performed (restitution).
But reliance damages are not allowed (the lumber on site was unused so still in Young's possession, so risk is allocated to Young for the lumber).


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