USA

20 Effect of Misunderstanding see also Formation

1. There is no manifestation of mutual assent to an exchange if the parties attach materially different meanings to their manifestations and

• neither party knows or has reason to know the meaning attached by the other; or
• each party knows or each party has reason to know the meaning attached by the other.

2. The manifestations of the parties are operative in accordance with the meaning attached to them by one of the parties if

• that party does not know of any different meaning attached by the other, and the other knows the meaning attached by the first party; or
• that party has no reason to know of any different meaning attached by the other, and the other has reason to know the meaning attached by the first party.

151 Mistake Defined

A mistake is a belief that is not in accord with the facts.

152 When Mistake of Both Parties Makes a Contract Voidable

1. Where a mistake of both parties at the time a contract was made as to a basic assumption on which the contract was made has a material effect on the agreed exchange of performances, the contract is voidable by the adversely affected party unless he bears the risk of the mistake under the rule stated in § 154.

2. In determining whether the mistake has a material effect on the agreed exchange of performances, account is taken of any relief by way of reformation, restitution, or otherwise.

153 When Mistake of One Party Makes a Contract Voidable

Where a mistake of one party at the time a contract was made as to a basic assumption on which he made the contract has a material effect on the agreed exchange of performances that is adverse to him, the contract is voidable by him if he does not bear the risk of the mistake under the rule stated in § 154, and

• the effect of the mistake is such that enforcement of the contract would be unconscionable, or
• the other party had reason to know of the mistake or his fault caused the mistake.

154 When a Party Bears the Risk of a Mistake

A party bears the risk of a mistake when

• the risk is allocated to him by agreement of the parties, or
• he is aware, at the time the contract is made, that he has only limited knowledge with respect to the facts to which the mistake relates but treats his limited knowledge as sufficient, or
• the risk is allocated to him by the court on the ground that it is reasonable in the circumstances to do so.

155 When Mistake of Both Parties as to Written Expression Justifies Reformation see also Agreed Obligations

Where a writing that evidences or embodies an agreement in whole or in part fails to express the agreement because of a mistake of both parties as to the contents or effect of the writing, the court may at the request of a party reform the writing to express the agreement, except to the extent that rights of third parties such as good faith purchasers for value will be unfairly affected.

156 Mistake as to Contract Within the Statute of Frauds see also Agreed Obligations

If reformation of a writing is otherwise appropriate, it is not precluded by the fact that the contract is within the Statute of Frauds.

157 Effect of Fault of Party Seeking Relief see also Agreed Obligations

A mistaken party's fault in failing to know or discover the facts before making the contract does not bar him from avoidance or reformation under the rules stated in this Chapter, unless his fault amounts to a failure to act in good faith and in accordance with reasonable standards of fair dealing.

158 Relief Including Restitution see also Remedies

1. In any case governed by the rules stated in this Chapter, either party may have a claim for relief including restitution under the rules stated in §§ 240 and 376.

2. In any case governed by the rules stated in this Chapter, if those rules together with the rules stated in Chapter 16 will not avoid injustice, the court may grant relief on such terms as justice requires including protection of the parties' reliance interests.

[Chapter 6 - Mistake]

266 Existing Impracticability or Frustration

1. Where, at the time a contract is made, a party's performance under it is impracticable without his fault because of a fact of which he has no reason to know and the non- existence of which is a basic assumption on which the contract is made, no duty to render that performance arises, unless the language or circumstances indicate the contrary.

2. Where, at the time a contract is made, a party's principal purpose is substantially frustrated without his fault by a fact of which he has no reason to know and the non-existence of which is a basic assumption on which the contract is made, no duty of that party to render performance arises, unless the language or circumstances indicate the contrary.