Legal Memorandum: Mutual Mistake and Validity of a Contract

Issue: Under Minnesota law, may the existence of a mutual mistake allow the principal of a properly executed power of attorney to avoid the application of a contract entered into by his or her agent?

Area of Law: Business Organizations & Contracts
Keywords: Mutual mistake; Contract; Conscious ignorance
Jurisdiction: Minnesota
Cited Cases: None
Cited Statutes: Restatement (Second) of Contracts § 152,
Date: 09/01/2009

Unlike a unilateral mistake, a mutual mistake by both parties as to the content of an agreement may render the agreement invalid. Winter v. Skoglund, 404 N.W.2d 786, 793 (Minn. 1987).

A mistake is a belief that is not in accord with the facts. “Mutual mistake” consists of a clear showing of a misunderstanding, reciprocal and common to both parties, with respect to the terms and subject matter of the contract, or some substantial part thereof.

Carpenter v. Vreeman, 409 N.W.2d 258, 261 (Minn. App. 1987) (citations omitted). See C.H. Young Co. v. Springer, 129 N.W. 773, 774 (1911).

Applying the mutual mistake doctrine, some Minnesota cases follow the Restatement (Second) of Contracts § 152 formulation of the principle. See Winter, 404 N.W.2d at 793. That section provides that where there is a mutual mistake, the party adversely affected may void the contract, “unless he bears the risk of mistake.” § 152(1). One of the means by which a party “bears the risk of mistake” is by remaining in a state of “conscious ignorance.”

Even though the mistaken party did not agree to bear the risk, he may have been aware when he made the contract that his knowledge with respect to the facts to which the mistake relates was limited. If he was not only so aware that his knowledge was limited but undertook to perform in the face of that awareness, he bears the risk of the mistake. It is sometimes said in […]

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