WPI 301.09 Enforceability—Unilateral Mistake

Use this instruction when a party seeks to avoid enforcement of the contract on the basis of unilateral mistake. Include the last sentence if its provisions form the basis for the claim. If the claim is that enforcement of the contract would be unconscionable, this would be a determination for the court as a matter of law.

Use this instruction with WPI 21.01 (Meaning of Burden of Proof—Preponderance of the Evidence) and the second paragraph of WPI 160.03 (Fraud—Burden of Proof—Combined With Preponderance of the Evidence).

Background. The grounds for unilateral mistake as a defense to the enforcement of the contract are the same as those for the remedy of rescission. As an equitable remedy, rescission would not ordinarily be presented for jury determination. On the other hand, unilateral mistake may well be presented as a defense to a breach of contract action. In the context of a case with both legal and equitable issues, the court may decide to present the question to the jury.

For a discussion of the definition of mistake and the requirements for mutual mistake, see the Comment to WPI 301.08 (Enforceability—Mutual Mistake). See Restatement (Second) of Contracts § 153 cmt. b (1981). Compare WPI 302.10 (Excuse of Performance—Frustration of Purpose).

Unilateral mistake has been recognized as a defense to a contract where the party asserting the defense can show that the other party either knew about the mistake or is charged with knowing of the mistake. Snap-on Tools Corp. v. Roberts, 35 Wn.App. 32, 35, 665 P.2d 417 (1983).

Unconscionability. The Restatement (Second) of Contracts section 153 (1981) also recognizes unconscionability as a basis for denying enforcement of a contract resulting from unilateral mistake. The “unconscionability” option has not been included in the instruction, because “whether particular facts render an agreement unconscionable is a question of law” for the court. Gill v. Waggoner, 65 Wn.App. 272, 828 P.2d 55 (1992). “An unconscionable contract is one which ‘no man in his senses, not under delusion, would make … and which no fair and honest man would accept ….’” Gill, 65 Wn.App. at 278 (quoting Montgomery Ward & Co., Inc. v. Annuity Bd. of S. Baptist Convention, 16 Wn.App. 439, 444, 556 P.2d 552 (1976)).

Reason to know of mistake. Actual knowledge of the mistake is not required; the party seeking rescission or avoidance may show that “the other party to the contract knows of or is charged with knowledge of the mistake.” Gill, 65 Wn.App. at 276; see also Basin Paving, Inc. v. Port of Moses Lake, 48 Wn.App. 180, 737 P.2d 1312 (1987); Snap-On Tools, 35 Wn.App. at 35; Appleway Leasing, Inc. v. Tomlinson Dairy Farms, Inc., 22 Wn.App. 781, 591 P.2d 1220 (1979). The Restatement (Second) of Contracts (1981) uses the phrase “reason to know,” rather than “should know,” because:

Restatement (Second) of Contracts § 19 cmt. b, referenced in § 153 cmt. e (1981).

Bids. In a series of cases involving relief from unilateral mistakes in the calculation of bids, either by avoiding forfeiture of a bid bond or enforcement of the contract itself, the courts have held that relief may be granted (a) if the bidder acted in good faith, (b) without gross negligence, (c) was reasonably prompt in giving notice of the error to the other party, and (d) will suffer substantial detriment, while the other party (e) has not changed position and will suffer no substantial hardship if the forfeiture is not exacted or the contract not enforced. Peter Kiewit Sons' Co. v. Wash. State Dep't of Transp., 30 Wn.App. 424, 429, 635 P.2d 740 (1981); Town of LaConner v. American Constr. Co., Inc., 21 Wn.App. 336, 585 P.2d 162 (1978).

Risk of mistake. Relief from a mistake is unavailable to one who bears the risk of mistake. Denaxas v. Sandstone Ct. of Bellevue, L.L.C., 148 Wn.2d 654, 63 P.3d 125 (2003). When the party seeking relief based on unilateral mistake had constructive knowledge of the true state of affairs, it is improper to treat the lack of knowledge as a “mistake” relieving that party from enforcement of the contract. Denaxas, 148 Wn.2d at 672; see also Tiegs v. Boise Cascade Corp., 83 Wn.App. 411, 426, 922 P.2d 115 (1996) (“[a] party who is aware he has only limited knowledge of the facts but treats his limited knowledge as sufficient, bears the risk of mistake”).

Reformation of contract. As an alternative to rescission of the contract, a party may seek reformation of the contract in order to conform the writing to the actual agreement of the parties. Denaxas, 148 Wn.2d 654.

Oliver v. Flow Intern. Corp., 137 Wn.App. 655, 664, 155 P.3d 140, 145 (2006); see also Wash. Mut. Sav. Bank v. Hedreen, 125 Wn.2d 521, 526, 886 P.2d 1121 (1994).

Burden of proof. A party alleging unilateral mistake must meet the standard of clear, cogent, and convincing evidence. See Kaufmann v. Woodard, 24 Wn.2d 264, 269–70, 163 P.2d 606 (1945) (reformation of contract); Wilhelm v. Beyersdorf, 100 Wn.App. 836, 843, 999 P.2d 54 (2000) (reformation of contract); Cavanaugh v. Brewington, 3 Wn.App. 757, 758, 477 P.2d 644 (1970) (reformation of contract). This heightened burden of proof appears to apply whether the party is seeking to reform a contract or avoid its enforcement. On the other hand, the party seeking avoidance or reformation of a contract need only show by a preponderance of the evidence that such party does not bear the risk of mistake.