Chapter 12.5 MISTAKE

• Jurisdiction: Washington

§12.5 MISTAKE

Parties to construction contracts sometimes invoke the doctrine of mistake—namely a "belief that is not in accord with the facts," Restatement (Second) of Contracts §151 (1981)—as a defense to performance. The doctrine comes in two varieties: Mutual mistake, when both parties to the contract held the erroneous belief; and unilateral mistake, when one party (typically the contractor) held such belief.

(1) Mutual mistake

A party—typically a contractor—seeking relief for mutual mistake must show that (1) both parties made a mistake at the time of the contract; (2) such mistake was as to a "basic assumption" on which the contract was made; (3) the mistake had a material effect on the performance; and (4) the party claiming the mistake did not assume the risk of such mistake. See Chem. Bank v. Wash. Pub. Power Supply Sys., 102 Wn.2d 874, 899, 691 P.2d 524 (1984) (citing Restatement (Second) of Contracts §152 (1981)).

The mistake must be as to a "basic assumption," that is, it must "vitally affect the basis upon which the parties contract." Pub. Util. Dist. No. 1 v. Wash. Pub. Power Supply Sys., 104 Wn.2d 353, 362, 705 P.2d 1195 (1985), modified, 713 P.2d 1109 (1986) (citations omitted). As noted by the Washington Supreme Court, "[o]rdinary shifts in market conditions or financial ability do not justify avoidance under the rules governing mistake." Id. (citing Restatement (Second) of Contracts §152 cmt. b (1981) and Leasco Corp. v. Taussig, 473 F.2d 777 (2d Cir.1972)).

The mistake claimed as an excuse for performance must also be as to a material fact. The test is whether the parties would have entered into the contract in the absence of the mistake. See Vermette v. Andersen, 16 Wn. App. 466, 469, 558 P.2d 258 (1976) (citing Davey v. Brownson, 3 Wn. App. 820, 824, 478 P.2d 258 (1970); Stahl v. Schwartz, 67 Wash. 25, 120 P. 856 (1912); Ross v. Harding, 64 Wn.2d 231, 391 P.2d 526 (1964); 13 Samuel Williston & Walter H. E. Jaeger, A Treatise on the Law of Contracts §§1542, 1557 (3d ed. 1970)).

Finally, the mistake must not be one assumed by the party seeking relief. See Pub. Util. Dist. No. 1, 104 Wn.2d at 362; see also John Cibinic, Jr., James F. Nagle, & Ralph C. Nash, Jr., Administration of Government Contracts 301-02 (5th Ed. 2016) (collecting federal construction cases).

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Comment: The party seeking relief on the basis of mutual mistake bears a high burden of proof, and must prove each element at

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