First Principles of Business Law
Circumstances that may invalidate a legal transaction

5. Mistake

5.3. Common mistake

 

 

 

Read the facts and the question and then choose the best answer.

A operates a shop selling expensive designer clothes. She has three leather coats for sale, each one priced at $4,000. One of these coats has a small stain on the sleeve and A asks her assistant to place a special label on it saying: "Stain marked - reduced to $1,000". By mistake, the assistant attaches the label to the wrong coat, one that is not stained. Soon afterwards B enters the shop, sees the coat with the reduced price ticket and offers to buy it, believing it has a stain somewhere. A sells the coat to B believing it is the stained one. Afterwards, A discovers the assistant's error, informs B of the mistake and wants to avoid the sale.

Can A avoid the contract because of the mistake, return the purchase price to B and recover the coat?

 

(a) Yes. There was no agreement to buy and sell an unstained coat so cheaply, so the contract can be set aside and the parties restored to their pre-contractual positions.

(b) No. There was a clear agreement to sell that coat for that price, and the mistake that both parties made does not justify setting the contract aside.

 

 

 

 

 

 

 

 
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