9. Which of the following will the court probably decide?

A mutual mistake is when the contract is based upon a mistake made by both parties. There are three requirements that must be satisfied before the adversely-affected party may avoid the contract on the account of a mutual mistake: (i) the mistake must concern a basic assumption on which the contract was made; (ii) the mistake must have a material effect on the agreed exchange of performances; and (iii) the party seeking avoidance did not assume the risk of the mistake.

The test for the first element, whether the mutual mistake relates to a 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. Market conditions and financial ability are not considered assumptions that are basic to the contract, and a mutual mistake on those terms will NOT void the contract.

As to the second element, the person seeking to avoid the contract for mutual mistake must show that the mistake has a material effect on the agreed exchange of performances. This party must also show that the resulting imbalance in the agreed exchange is so severe that he cannot fairly be required to carry it out.

If the party seeking to avoid enforcement of the contract on the basis of mutual mistake is the one who originally took on the risk that there might be a mistake, he will not be able to raise a mutual mistake defense. This commonly occurs where one party is in a better position to know the risks than the other party (e.g., contractor vs. homeowner) or where the parties knew their assumption was doubtful (i.e., the parties were consciously aware of their ignorance). In other words, to be a defense, it must truly be a mistake, not uncertainty.

Implied in every contract for sale by a merchant who deals in goods of the kind sold is a warranty that the goods are merchantable. Most commonly, that the goods are «fit for the ordinary purposes for which such goods are used,» and a failure to live up to this test is the usual claim in a merchantability suit. However, a warranty will also be implied in a contract for the sale of goods whenever: (i) any seller, merchant or not, has reason to know the particular purpose for which the goods are to be used and that the buyer is relying on the seller's skill and judgment to select suitable goods; and (ii) the buyer in fact relies on the seller's skill or judgment.

Unilateral mistakes arise most commonly when one party makes a mechanical error in computation. If only one of the parties is mistaken about facts relating to the agreement, the mistake will not prevent the formation of the contract. However, if the non-mistaken party knew or had reason to know of the mistake made by the other party, the contract is voidable by the mistaken party. As is the case with mutual mistake, for the contract to be voidable, the mistake must have a material effect on the agreed-upon exchange and the mistaken party must not have borne the risk of the mistake.

C is correct. A contract may be rescinded on grounds of mutual mistake of fact if the mistake relates to a fundamental assumption of the contract having a material effect on the exchange unless the court determines that the party asserting mistake should bear the risk of the mistake. Here, the effect of the mistake was material to the value of the exchange because it reduced the boar's value from $800 to $100. However, the boar's fertility could not be considered a fundamental assumption of the contract. The breeder bought a two-month-old boar and knew that fertility could not be determined until the boar was 12 months old, meaning there was no way of knowing the fertility at the time of the sale. In addition, although the breeder could not have investigated whether the boar was fertile at the time of sale, it seems likely that the court nonetheless would find that the breeder implicitly assumed the risk of the boar's infertility, since the breeder was aware of this possibility yet went forward with the purchase.

A is incorrect. The breeder is not likely to win because the status of the boar's fertility was not a mistake, but an uncertainty. When the breeder contracted to buy the boar, it was known that the fertility could not be evaluated for 10 months, which means the risk is assumed that the boar could be infertile.

B is incorrect. It would not have been feasible for the seller to have impliedly warranted that the boar was fit for breeding, even if the seller knew that was the reason the breeder wanted it. An implied warranty will exist where the seller knows why the buyer is purchasing the goods, that the buyer is relying on the seller's ability to select the goods, and the buyer in fact relied. However, this was not a matter of the seller using skill to ensure that the goods were fit for the breeder's specific purpose. The seller could not have known the status of the boar's fertility, so it would not have been possible to imply such a warranty.

D is incorrect. This answer reaches the correct answer with the wrong reasoning. The seller will win, but not because the mistake was unilateral rather than mutual. Either type of mistake will not apply here, where, not only did the breeder assume the risk that the boar might be infertile, but this was not a mistake. It was an uncertain issue regarding the boar, which neither party could have known at the time of the sale.