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Anderson Bros. Corp. v. O'Meara - 306 F.2d 672 (5th Cir. 1962)

Rule:

The Texas courts have held that when unilateral mistake is asserted as a ground for relief, the care which the mistaken complainant exercised or failed to exercise in connection with the transaction sought to be avoided is a factor for consideration. It has been stated that though a court of equity will relieve against mistake, it will not assist a man whose condition is attributable to the want of due diligence which may be fairly expected from a reasonable person. This is consistent with the general rule of equity that when a person does not avail himself of an opportunity to gain knowledge of the facts, he will not be relieved of the consequences of acting upon supposition. Whether the mistaken party's negligence will preclude relief depends to a great extent upon the circumstances in each instance.

Facts:

Defendant Anderson Brothers Corporation ("Anderson"), a Texas corporation engaged in the business of constructing pipelines, sold a barge dredge to defendant Robert W. O'Meara, a resident of Illinois who was an oil well driller doing business in several states and Canada. O'Meara filed a lawsuit against Anderson in federal district court suit seeking rescission of the contract for sale, in the alternative, damages. O'Meara alleged breaches of expressed and implied warranty and fraudulent representations as to the capabilities of the dredge. By amendment, he alleged as an alternative to the fraud count that the parties had been mistaken in their belief as to the operations of which the dredge was capable, and thus there was a mutual mistake that prevented the formation of a contract. After trial without a jury, O'Meara's prayer for rescission was denied, but damages were awarded. The court denied Anderson's counterclaim for the unpaid purchase price of the dredge. Both parties appealed. Anderson contended that no relief should have been given to O'Meara, and O'Meara contended that the damages awarded to him were insufficient.

Issue:

Was O'Meara entitled to damages in his breach of contract action?

Answer:

No.

Conclusion:

The court of appeals reversed the district court's judgment and remanded the case for further proceeding. The court ruled that O'Meara should take nothing on his claim. The court held that, in an action on a contract based on mistake, relief should be denied where the mistaken party—O'Meara—exercised no diligence in ascertaining readily accessible facts before he entered into a contract. The court held that a mutual mistake was one common to both parties to the contract, each laboring under the same misconception. The court determined that O'Meara's mistake in believing that the dredge was capable, without modification, of performing sweep dredging was not a mistake shared by Anderson, who had designed and built the dredge for use in trenching operations and knew its capabilities. The court held that when unilateral mistake was asserted as a ground for relief, the care which the mistaken complainant exercised or failed to exercise was a factor for consideration. O'Meara, the court determined, exercised no diligence, prior to the purchase, in determining the uses to which the dredge might be put. Further, although a court of equity would grant relief from mistake, it would not assist a party whose condition was attributable to its lack of due diligence.

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