P bought a coin from D for $500. Both parties thought the coin was a rare 1916 Denver minted dime.
The coin turned out to be counterfeit when P tried to resell the coin to someone else.
P seeks rescission of the contract.
Procedural History:
Lower court found for D.
NJ Superior Court reversed, found for P, contract rescinded for mutual mistake.
Issues:
Can a party rescind a contract on the basis of mutual mistake if both parties are mistaken as to a material fact involved in the bargain?
Holding/Rule:
A party can receive rescission of a contract on the basis of mutual mistake if both parties are mistaken as to a material fact involved in the bargain.
Reasoning:
When 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.
The mistake was mutual in that both parties were laboring under the same misapprehension as to this particular, essential fact. The price asked and paid was directly based on that assumption.
The fact that the P may have been negligent in inspecting the coin does not bar a claim for rescission.
The case would be different if either side were uncertain about the value or authenticity or if the seller had accepted the buyer's judgment on these matters.
Dissent:
None.
Notes:
Express warranty might have been a better bin. This is because the buyer could have been entitled to rescission and other damages since he lost profit from being able to resell it.
