Unilateral and Mutual Mistake Case: Lenawee County Board of Health v. Messerly (1982, MI) [pp.

484-492]

Procedural History: Court of Appeals entered judgment in favor of the Pickles for contract rescission. Facts: A previous owner (Bloom) illegally installs a septic tank in home without a permit, and in violation of a health code. The property changes hands many times and appellee (Pickles) buys the property from appellant (Messerly), without knowledge of the defective sewage system. The contract for sale includes a clause that says, "Purchaser has examined this property and agrees to accept same in present condition." Shortly after the transaction was closed, Lenawee County Board of Health obtained a permanent injunction and condemned the property as uninhabitable by humans until the defective sewage system is fixed. Appellee, Pickle, seeks to avoid the contract on the basis of mutual mistake. Issue: Whether a contract can be rescinded due to a mutual mistake as to the nature of the property, when the contract included an "as is" clause. No. Holding: Judgment for Pickles reversed b/c Pickles not entitled to contract rescission. Reasoning: §152 generally allows for a contract to be voidable due to mutual mistake, if it has a material effect on the agreed exchange. However, this remedy is not available when one of the parties has assumed the risk, as here with the clause in the contract that says the buyer has examined the property and agrees to accept it in the present condition ("as is" clause). RULE: Avoidance of the contract due to mutual mistake does not apply when one party has assumed the risk. Notes • Doesn’t use Sherwood as a precedent. • Distinction btwn substance and quality is very hard here (as in Sherwood) ○ Court substitutes this distinction btwn substance v. quality for essence v. collateral ○ Court adopts §152 (b/c not a statute, by adopting it, it becomes a law in that state) • Rescission is an equitable remedy granted at the discretion of the court. ○ Parties are not equally innocent here - one party said they would take the land "as is"