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6. Which one of the following scenarios would best support an action by the trainer, rather than the son, to rescind the sale?
A son, who knew nothing about horses, inherited a thoroughbred colt whose disagreeable behavior made him a pest around the barn. The son sold the colt for $1,500 to an experienced racehorse-trainer who knew of the son's ignorance about horses. At the time of the sale, the son said to the trainer, «I hate to say it, but this horse is bad-tempered and nothing special.»
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The general test for when a mutual mistake relates to the basic assumption on which the contract is founded is if one party will get an unexpected, unbargained-for gain and the other party will suffer an unexpected loss. However, market conditions and financial ability are not considered basic assumptions and a mutual mistake on those terms will not void the contract.
A is correct. If in his first race after the sale, the horse dropped dead of a rare, undiscoverable heart condition, the trainer could make a plausible argument that the contract could be rescinded on grounds of mistake. The condition related to a fundamental assumption (the horse's suitability for racing) that destroyed the subject matter of the contract, and since the heart condition was not expected or discoverable, a court might find that the trainer should not bear the risk of the mistake.
B is incorrect. Remember, the call of the question asks you to select the factual scenario that best supports an action to rescind the contract by the trainer. This is not a factor that relates to a fundamental assumption of the contract because the facts suggest that the horse was purchased as a racehorse and not a breeder. The contract involving the horse did not relate to the horse's future ability as a breeder, so the horse's sterility cannot be a fundamental assumption of contract for a racehorse.
C is incorrect. A mistake refers to a mistaken belief about an existing fact, not an erroneous belief about what will happen in the future. In this question, the contract is about the horse's ability as a racehorse. The mistake introduced in this answer choice has to do with an erroneous belief about what will happen in the future, i.e., that the horse will be a good stock for breeding AFTER racing. Thus, the horse's bloodline cannot be a basic assumption upon which the contract was formed.
D is incorrect. A disadvantaged party will not be able to avoid the contract if the risk of that mistake is still allocated to him. The risk can be allocated to the other party in three ways: (i) by agreement of the parties; (ii) when a party is aware at the time the contract is made that he has only limited knowledge with respect to the facts which the mistake relates but treats his limited knowledge as sufficient; or (iii) the risk is allocated by the court as is reasonable under the circumstances. The risk that the horse might go berserk was one of which the trainer had notice, and was, therefore, a risk that he should bear.