Lenawee County Board of Health v. Messerly
- The Pickles bought a tract of land containing an apartment building from the Messerlys with the intention of using the land for rental income.
- Before the Messerlys owned the property, the previous owner installed a septic tank without a permit and in violation of the health code. Neither the Messerlys or the Pickles knew anything about this.
- The contract contained an "as is" clause.
- After the sale, the Pickles noticed raw sewage on the ground. The health board condemned the land.
- The Pickles sought rescission of the contract under mutual mistake and misrepresentation. The Messerlys sued for foreclosure.
- Lower court found Pickles had no cause of action, foreclosure ordered against the Pickles.
- Court of Appeals reversed, found the Pickles did have a cause of action.
- MI Supreme Court reversed, found the Pickles had no cause of action, foreclosure ordered against the Pickles.
- How should a court decide cases of mistake between two equally innocent parties?
- In cases of mistake by two equally innocent parties, the court should determine which blameless party should assume the loss resulting from the misapprehension they shared.
- The parties in this case were laboring under a mutual mistake of fact which materially affected the essence of the contractual consideration.
- The best approach to decide cases of mutual mistake is by the courts doing case-by-case analysis whereby rescission is indicated when the mistaken belief relates to a basic assumption of the parties upon which the contract is made.
- A court need not grant rescission in every case in which the mutual mistake relates to a basic assumption and materially affects the agreed performance of the parties.
- Rescission is not available, however, to relieve a party who has assumed the risk of loss in connection with the mistake.
- The court should look to whether the parties have agreed to the allocation of the risk between themselves. Through the "as is" clause, the risk was allocated to the buyers.
- Prof thinks this decision is bunk.