1545. Mistake in the formation and mistake in the performance of a contract.

A mistake may arise in the original agreement of the parties, or in the performance of a contract as to which no mistake existed. Thus, when making their original bargain, the parties either may have used the name Blackacre in contracting, on the assumption that it was the designation of Whiteacre; or by their original contract may have correctly stated that Whiteacre was the subject of the bargain but thereafter a conveyance of Blackacre may have been made and accepted in supposed performance of the contract. The distinction between these cases, however, relates merely to the contract in which the mistake occurred. For even where the mistake is in the performance of the original contract, the performance itself if accepted, whether or not under a mutual mistake, will necessarily involve a further agreement. Moreover, where the transaction relates to land, the acceptance of a deed operates as a discharge of the original contract.24 Whether this is true in a case of a transfer of personal property is properly a question of fact; but in any event the acceptance of proffered performance at least involves an agreement to become the owner of what is offered. Therefore whether a court of equity rescinds or reforms the original contract, or merely the performance of the contract, it is, in the latter case as well as in the former generally destroying or altering a bargain which the parties in fact made. If the situation is merely that one party to a contract has performed only in part, and there is neither a mistake as to the character of that part performance, nor a merger of the original agreement nor an agreement to take part performance as satisfaction, there seems no occasion to discuss mistake. Nothing need be rescinded or reformed. There is simply a right of action for breach of the original contract.26

24 See supra, § 926, infra, § 1918. 25 See supra, §§ 700 et seq.

26 In Clark v. Stetson, 115 Me. 72, 97 Atl. 273, 275, the court said: "The plaintiff and defendant agree that the purchase included all the stock on the farm, and all the farming implements and tools with a few exceptions.

25

There is no controversy over the stock. There is controversy over the hens and some of the implements. But the plaintiff himself inspected the premises before purchase, made out a long list of articles to be included in the sale, examined this list with the defendant, and they both agreed to its correct

§ 1546. Classification of the Civil law.

The Civil law, starting from the subjective standpoint that the existence of a contractual obligation or a transfer depends upon the will of the actor instead of on the natural reliance of one party to the transaction on words or acts of the other, 27 seeks to find what mistakes are so essential that the actor cannot be said to have accomplished a legal act. To this end a classification is made of misunderstanding where though there is an expression of mutual assent, there is no real assent, and essential error where though the parties mean the same thing by their expressions, and express assent, the actor does so under the assumption of the existence of an essential circumstance which in fact does not exist.

Essential error is divided into error (1), as to the nature of the transaction, (2), as to the person contracted with, and (3), as to the object to which the contract relates. 28

ness. When the plaintiff took possession, several of the articles which he supposed he had purchased had been taken or were withheld, and the defendant claimed that they were not included. This, however, did not prove that no contract had been made. If they had been taken by the defendant and belonged to the plaintiff, the plaintiff's legal rights were secure. But these rights grew out of the existence, and not out of the non-existence, of the contract itself."

Even in the Civil law the emphasis seems increasingly laid on outward manifestation and reliance thereon. In the German Civil Code (Sec. 119, 120), it is indeed stated that a declaration of will may be avoided if made under a material mistake, or if incorrectly communicated; but it is also enacted (Sec. 122) that under these circumstances the declarant must compensate one who relies on the declaration. In the Swiss Code of Obligations, the editor (Rossel) says (p. 4), "Our Code has adopted the theory of declaration of will-the Erklärungstheorie, the intent of the

parties based on agreement of intention which they have reciprocally manifested, and not on their intention itself."

28 "Cases of essential error. These cases agree in this, that the actor intends an expression of his will and a juristic result; but he does not express the juristic result which he intends,rather he expresses another which he does not intend, without being aware, however, that he does not intend it. In cases of essential error, the transaction is invalid. . . . The particular cases of essential error are as follows:

"1. Error as to the nature of the transaction (error in negotio)—the actor intends to conclude a different transaction from that which he expresses; for example, he signs a bill of sale in the supposition that it is a lease.

"2. Error with respect to the person (error in persona)—the actor intends a different party than the one for whom he has expressed himself. But it is to be observed that this error is without interest to the actor in those cases in which the person is indifferent (e. g.,

or it

This classification serves sufficiently to classify by their dramatic facts cases as they ordinarily arise; but in the English and American law, the classification has no further value. Neither the rights nor the remedies of the parties depend upon it. Misunderstanding may render an agreement void, but it may not be even voidable.29 Error in regard to the person may render a transaction void; 30 it may be rendered voidable,31 may be perfectly enforceable, the mistake having no effect.32 A mistake as to the object to which the agreement relates may sometimes render the transaction void but sometimes only voidable. 33 A mistake as to the nature of the transaction may render it void,34 or voidable; 35 or may have no effect at all.36 Moreover, there are cases of mistake which do not fall within any of these categories which may, nevertheless, render a transaction voidable. No more specific rule can be given or is desirable than that already stated,-If the mistake vitally affects the basis upon which the parties contracted relief should sales for cash), and hence does not influence the validity of the transaction.

"3. Error with respect to the object (error in corpore)—the actor intends a different object from the one he named in expressing his will. In contracts of sale, error as to qualities of the object which, according to mercantile understanding, determine the nature of the object (error in substantia) stand on the same basis as error with respect to the object.

"4. The so-called misunderstanding is on the same basis as essential error. That is to say, in contracts the error is essential if by reason thereof a mutual assent results in appearance only; each party errs with respect to the will of the other and expresses an intention which does not correspond thereto. The error may have to do with the nature of the legal relation (one pays a sum as loan, the other receives it as gift, so that there is neither a loan nor a gift), or the person of the other party (one obtains a loan from A, but believes he has obtained it from B, so that there

is no loan, but instead an 'unjust enrichment'), or the object (one intends to buy the Cornelian estate, the other to sell the Sempronian, so that no legal transaction results).

"Other kinds of mistake are without influence upon the validity of a legal transaction. . . . Also an error in the motive by reason of which the actor entered into the transaction, in general, is without influence upon its validity. But there are important exceptions." Baron, Pandekten, § 50, II, translated by Pound, Readings in Roman Law (2d ed.), 39.

29 See §§ 94, 95.

30 See supra, § 80.
31 See supra, § 1517.
32 Ibid.

33 See infra, §§ 1559-1563.
34 See supra, § 1488.

35 As where a writing is negligently signed but the signature was induced by fraud. See supra, § 1516.

36 As where a writing is negligently signed but there was no fraud. See supra, § 35.

be granted. The inadequacy of the classification just criticised seems to have been observed by the draftsmen of the German Civil Code, which contains a general provision not greatly differing from that here advocated.37 It having been noted that the classification is merely for convenience of treatment, the situations which commonly arise may be considered.

§ 1547. Reformation of mistake in expression of contract. Where a written agreement is not in conformity with the actual intention of the parties in a material matter, a court of equity will reform the writing in accordance with the actual agreement if innocent parties will not be affected thereby. The jurisdiction is confined to writings, but as to them it is clear. 38 "In the application of this principle, mistakes as to title have been corrected, the word 'heirs' substituted for 'successors,' omission of words of inheritance supplied, a deed reformed to bind a copartnership instead of an individual member, a mortgage in the name of an agent rectified by inserting the name of

"If the declarant was, at the time of the declaration [of will] mistaken as to the substance of the same or did not at all intend to make such a declaration, he may contest the same, when it is to be assumed that he would not have made it, had he known the facts and had considered the matter advisedly. A mistake, relating to such qualities of persons or things, which in intercourse are considered material, shall be regarded as a mistake as to the substance of the declaration." German Civil Code, Sec. 119.

* Fowler v. Fowler, 4 DeG. & J. 250; Walker v. Armstrong, 8 DeG. M. & G. 531; Hunt v. Rousmaniere's Admr., 1 Pet. 1, 13, 7 L. Ed. 27; Walden v. Skinner, 101 U. S. 577, 583, 25 L. Ed. 963; McMaster v. New York Life Ins. Co., 183 U. S. 25, 46 L. Ed. 64, 22 Sup. Ct. Rep. 10; Philippine Sugar Estates Development Co. v. Government of Philippine Ids., 247 U. S. 385, 62 L. Ed. 1177, 38 Sup. Ct. 513; Andrews v. Essex Ins. Co., 3 Mason,

6, 10; Rogers v. Hinckle, 249 Fed. 548, 161 C. C. A. 474; Stone v. Hale, 17 Ala. 557, 52 Am. Dec. 185; Cake v. Peet, 49 Conn. 501; West v. Suda, 69 Conn. 60, 36 Atl. 1015; Dunn v. O'Mara, 70 III. App. 609; Kinman v. Hill (Ia.), 156 N. W. 168; Miller v. Davis, 10 Kans. 541; Inskoe v. Proctor, 6 T. B. Mon. 311; Canedy v. Marcy, 13 Gray, 373; Gaylord v. Pelland, 169 Mass. 356, 47 N. E. 1019; McGraw v. Muma, 164 Mich. 117, 129 N. W. 20; Wall v. Meilke, 89 Minn. 232, 94 N. W. 688; Mahoney v. Minnesota, etc., Ins. Co., 136 Minn. 34, 161 N. W. 217; Tesson v. Insurance Co., 40 Mo. 33, 93 Am. Dec. 293; Story v. Gammell, 68 Neb. 709, 94 N. W. 982; Smith-Austermuhl

the principal as mortgagor, and the principal substituted for a trustee who had been mistakenly designated and had bound himself as a contracting party. 39 If an instrument which requires a seal is by accident or mistake executed without one, a court of equity may grant relief by compelling a seal to be affixed, or otherwise." 40 An omission of an agreement by the grantee to assume encumbrances, 41 or of a reservation in a warranty deed of certain encumbrances 42 may similarly be supplied. Equity "will exercise its power to reform instruments, not only as between the original parties, but as to those claiming under them in privity, such as personal representatives, heirs, assigns, grantees, judgment creditors, or purchasers from them with notice of the facts." 43

1548. Reasons and limits of reformation.

It is often said that in the exercise of this jurisdiction a court of equity is merely substituting the real transaction between the parties for the apparent one, but the explanation is inadequate. Even if it were granted that mental assent is essential to the formation of contracts, 44 it certainly cannot be claimed 581. See also Harding v. Jewell, 73 Me. 426; Parsons v. Parsons, 230 Mass. 544, 119 N. E. 1020.

39 Eustis Manufacturing Co. v. Saco Brick Co., 198 Mass. 212, 219, 84 N. E. 449, citing Livingstone v. Murphy, 187 Mass. 315, 72 N. E. 1012, 105 Am. St. Rep. 400; Hadlock v. Williams, 10 Vt. 570; Denys v. Shuckburgh, 4 Y. & C. 42; Colchester v. Culver, 29 Vt. 111; McNaughten v. Partridge, 11 Ohio, 223, 38 Am. Dec. 731; Remington v. Higgins, 54 Cal. 620; Blakeman v. Blakeman, 39 Conn. 320; Haussman v. Burnham, 59 Conn. 117, 22 Atl. 1065, 21 Am. St. Rep. 74; Sparta School v. Mendell, 138 Ind. 188, 37 N. E. 604.

40 Gaylord v. Pelland, 169 Mass. 356, 359, 47 N. E. 1019, citing Bernard's Township v. Stebbins, 109 U. S. 341, 349, 27 L. Ed. 956; Bullock v. Whip, 15 R. I. 195, 2 Atl. 309; Conover v. Brown, 49 N. J. Eq. 156; Lebanon Savings Bank v. Hollenbeck, 29 Minn. 322; Springfield Savings Bank v. Springfield Congregational Society, 127 Mass. 516; Chase v. Peck, 21 N. Y.

41 Williams v. Everham, 90 Ia. 420, 57 N. W. 901; Stephenson v. Elliott, 53 Kan. 550, 36 Pac. 980.

42 Zuspann v. Roy, 102 Kan. 188, 170 Pac. 387. Other reservations were inserted in Warrick v. Smith, 137 Ill. 504, 27 N. E. 709; Stines v. Hays, 36 N. J. Eq. 369; Uiklein v. Matthews, 93 N. Y. App. D. 57, 86 N. Y. S. 924; Marshall v. Homier, 13 Okl. 264, 74 Pac. 368; Baab v. Houser, 203 Pa. 470, 53 Atl. 344; Pulaski Iron Co. v. Palmer, 89 Va. 384, 16 S. E. 275.

43 Schneider v. Bulger (Mo. App.), 194 S. W. 737, 739, citing Sicher v. Rambousek, 193 Mo. 113, 129, 91 S. W. 68. See also Osincup v. Henthorn, 89 Kan. 58, 130 Pac. 652, 46 L. R. A. (N. S.) 174, Ann. Cas. 1914 C. 1262. 44 See supra, §§ 20, 94, 95.