Leasco Corp. v. Taussig - 473 F.2d 777 (2d Cir. 1972)

Rule:

The legal concept of mistake is similar to the legal concept of misrepresentation in that, under each, a party to a contract may be relieved from his obligations if he was unaware of certain material facts. Mistake, however, is only such error as is made without representation or deception by the other party to the transaction. Where the mistake is unilateral, the contract is not voidable. But where both parties assume a certain state of facts to exist, and contract on the faith of that assumption, they can be relieved from their obligations if the assumption is erroneous.

Facts:

Peter T. Taussig and Leasco Corporation (Leasco) entered a contract in which Taussig was to purchase a company Leasco for a price that had been determined by the parties based, in part, on the projected before tax profit for the year. The company experience a loss, and Taussig refused to close the deal. Leasco sought and was granted specific performance.

Issue:

Did the trial court err in ruling that Taussig’s claim of rescission based on mutual mistake and misrepresentation was without merit?

Answer:

No.

Conclusion:

The court held that there was no mutual mistake. Neither party intended to allow rescission of the agreement if, as it turned out, one party got a better bargain than had been anticipated. Neither party could safely assume that the projected earnings would be realized. Both parties had equal access to information indicating that such a projection would be highly unreliable. The court found that because of Taussig’s relationship with the company prior to the contract he was in a position to be quite familiar with all aspects of the company. The court found that Leasco had bypassed two offers of sale in reliance that Taussig would follow through with the contract. The court affirmed the judgment in favor of Leasco, and the order for specific performance.