A unilateral mistake may afford ground for rescission of a contract where there is a material mistake and such mistake is so palpable that the party not in error will be put on notice of its existence.
After the Plaintiff contractor submitted a bid for work, along with the required $ 100,000 deposit, to the Defendant sanitary district, it discovered that its excavating subcontractor had given an erroneous quote for its part of the job, which was $ 150,000 too low. In challenging the judgment of recission of the contract, the sanitary district claimed the contractor had failed to show clear and positive evidence that the subcontractor's mistake was a material one. The sanitary district also claimed that the mistake was mathematical in nature and was not a proper basis for recission. The court affirmed the judgment, which rescinded the contract between the sanitary district and the contractor and ordered the sanitary district to return to the contractor a $ 100,000 deposit that it made thereunder.
Whether a unilateral mistake justified rescission of a contract?
The court found that materiality was shown, primarily because the subcontractor's error represented 17 percent of the bid amount. The court also found that the other elements necessary for recission were present: 1) given the substantial loss which would have been incurred by the contractor, enforcement of the contract would be unconscionable; 2) because the project had not begun, the status quo could easily be restored; and 3) the contractor had used due care in submitting its bid. The court noted that the nature of the mistake should be determined by the facts surrounding it, not a label, such as "mathematical."