Sherwood v. Walker (1887)

IRAC Summary:

Issue: The central issue in Sherwood v. Walker is whether a mutual mistake of fact as to a fundamental aspect of an agreement is grounds for rescission of a contract.

Rule: A contract may be rescinded if both parties are under a mutual mistake of material fact which significantly affects the agreed performance.

Application: In this case, both parties believed that the cow being sold was barren. This belief was a significant factor in determining the cow’s value and the basis of their agreement. When the cow was later found to be fertile, the fact was materially different from what both parties had assumed, which dramatically changed the value of the cow and the essence of the contract.

Conclusion: The Michigan Supreme Court held that the mutual mistake about the cow’s fertility was a sufficient reason to rescind the contract, as the mistake went to the substance of the agreement.

Detailed IRAC Outline:

I. Issue:
A. Can a contract be rescinded based on a mutual mistake regarding a fundamental aspect of the agreement?

II. Rule:
A. A contract is voidable if both parties entered into the agreement under a mutual mistake of a material fact.

III. Application:
A. Facts:
1. Walker, the seller, agreed to sell Sherwood, the buyer, a cow named Rose 2nd of Aberlone for $80, assuming the cow was barren.
2. Both parties believed the cow was barren and of little value beyond its meat.
3. After the agreement, but before the final transaction, it was discovered that the cow was actually fertile and worth at least $750.
B. Trial Court Proceedings:
1. The trial court ruled in favor of Walker, allowing him to rescind the contract.
2. Sherwood appealed, claiming the contract was enforceable regardless of the cow’s fertility.
C. Michigan Supreme Court Analysis:
1. The Court examined whether the mistaken belief as to the cow’s barrenness was a mutual mistake of material fact.
2. The Court determined that the fertility of the cow was indeed a fundamental aspect of the contract, as it significantly altered the value of the cow.
3. The Court found that both parties made the contract with the same misunderstanding regarding a material fact.
D. Discussion:
1. Application of the doctrine of mutual mistake requires a clear understanding of what constitutes a material fact to the agreement.
2. The Court differentiated between mistakes of value (not sufficient to rescind a contract) and mistakes of fact (may allow rescission).
3. In this case, the Court concluded that Sherwood and Walker contracted based on an essential fact that was incorrect, thus the contract was made under a mutual mistake.

IV. Conclusion:
A. The Michigan Supreme Court held that Sherwood and Walker were both mistaken about a material fact concerning the contract, which was the cow’s fertility.
B. This mutual mistake rendered the contract voidable, and therefore, it was rescinded.
C. The court reversed the trial court’s judgment and remanded the case for further proceedings consistent with its opinion.

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