This section is from the book "The Law Of Contracts", by William Herbert Page. Also available from Amazon: Commercial Contracts: A Practical Guide to Deals, Contracts, Agreements and Promises.
If A enters into a contract knowing that he has not sufficient or exact knowledge of a material fact, he can not avoid such contract on the ground of mistake because such fact turns out differently from what he had hoped.1 The use of the term "mistake" implies that the parties are not in ignorance whether the subject-matter is in existence or not, deliberately assuming the risk of its non-existence. Where the parties are aware that the existence of the subject-matter is doubtful, and contract with reference thereto, each party taking the chances of the event's being adverse to himself, the contract is valid.2 If a vendee accepts an offer to sell realty, knowing that he does not know exactly where the land is located,3 or if a vendee buys land he has never seen, consciously ignorant of its location or quality,4 or if the vendee takes the chance of a doubtful title,5 no mistake exists for which the contract can be avoided. Where a woman releases dower, consciously ignorant whether she has a dower interest in the property released or not,6 or securities of which the value is doubtful, are entered at their face value,7 or the owner of land enters into a contract to sell it, knowing that he is ignorant of the identity of the real purchaser,8 none of them can avoid the contract because the event results differently from their anticipations.
3 Nelson v. Chicago & N. W. R. Co., Ill Minn. 193, 20 Am. & Eng. Ann. Cas. 748, 126 N. W. 902. See also, Seymour v. Chicago & N. W. Ry. Co., 181 la. 218, 164 N. W. 352.
4 Layer v. Layer, 184 Mich. 663, 151 N. W. 759.
1 United States. Lenman v. Jones, 222 U. S. 51, 56 L. ed. 89.
Georgia. Woodside v. Lippold, 113 Ga. 877, 84 Am. St. Rep. 267, 39 S. E. 400.
Iowa. Morgan v. Messenger, 125 la. 247, 101 N. W. 127.
Nebraska. Moore v. Scott, 47 Neb. 346, 66 N. W. 441.
Pennsylvania. Gormby v. Gormby, 130 Pa. St. 467, 18 Atl. 727; Ancient Order of United Workmen v. Mooney, 230 Pa. St. 16, 79 Atl. 233.
Texas. Houston, etc., Ry. v. McCarty, 94 Tex. 298, 86 Am. St. Rep. 854, 53 L. R. A. 507, 60 S. W. 429 [reversing 21 Tex. Civ. App. 568, 54 S. W. 421].
Virginia. Persinger v. Chapman, 93 Va. 349, 25 S. E. 5.
Wisconsin, Kowalke v. Light Co., 103 Wis. 472, 74 Am. St. Rep. 877, 79 N. W. 762. "Where a party enters into a contract, ignorant of a fact, but meaning to waive all inquiry into it, or waives an investigation after his attention has been called to it, he is not in mistake in the legal sense": Kowalke v. Light Co., 103 Wis. 472, 74 Am. St. Rep. 877, 79 N. W. 762 [citing Hurd v. Hall, 12 Wis. 112, which was decided on the authority of Kelly v. Solari, 9 Mees. & W. 54].
2 Sears v. Grand Lodge, 163 N. Y. 374, 50 L. R. A. 204, 57 N. E. 618.
3 Beebe v. Birkett, 109 Mich. 663, 67 N. W. 996.
4 Moore v. Scott, 47 Neb. 346, 66 N. W. 441; Crist v. Dice, 18 O. S. 536.
5 Sheffield v. Hancock County, 164 la. 561, 146 N. W. 439.
So where A's life was insured by X in favor of B, and after A had disappeared and been absent a long time, B sued X, and to compromise the suit X agreed to pay a certain sum down and a further sum in a certain time, X is bound to make such payment, though before it falls due, it is learned that A is alive, since while both parties thought it probable that he was dead, both knew that they were really ignorant as to the fact.9 If insurance is effected upon a vessel by a policy, the terms of which provide for prior loss as well as future loss, such policy is valid as to an injury which has already been sustained if the insured acts in good faith and communicates to the insurer such knowledge of the condition of the insured property as he possesses.10
The fact that a contractor is unable to make a thorough examination of the physical conditions of the ground beneath the surface, because the ground is frozen, does not enable him to avoid a contract for excavation into which he enters without making such examination.11 If a statement which is issued to bidders provides that there is no express or implied agreement, "that the surface of the rock or the depth of the rock excavation or the character of the material is even approximately correct," and if the contract provides for payment at a "quantity rate," the amount to be paid to the contractor depending upon the quantity of excavation done or material furnished, the fact that some of the estimates were grossly inadequate does not render the contract invalid for mistake.12 If the estimates upon which bids are made set forth that the estimate as to the amount of excavation is approximate only,the fact that the contractor is obliged to excavate more than double the quantity which is shown by the estimate does not render the contract invalid for mistake.13
6 Gormby v. Gormby, 130 Pa. St. 467, 18 Atl. 727; Pennybacker v. Laidley, 33 W. Va. 624, 11 S. E. 39.
7 Morgan v. Messenger, 125 la. 247, 101 N. W. 127.
8 Lenman v. Jones, 222 U. S. 51, 56 L. ed. 80.
9 Sears v. Grand Lodge, 163 N. Y. 374, 50 L. R. A. 204, 57 N. E. 618.
10 MTianahan v. Universal Insurance Co., 26 U. S. (1 Pet.) 170, 7 L. ed. 98; Arkansas Ins. Co. v. Bostick, 27 Ark. 539.
11 Winston v. Pittsfield, 221 Mass. 356, 108 N. E. 1038.
12 Young v. Holyoke, 225 Mass. 140. 114 N. E. 62.
A compromise of a claim for personal injuries which is entered into when the injured party knows that the extent of his injuries can not be determined with accuracy,14 as where a woman releases the claim for personal injuries consciously ignorant whether she is pregnant or not,15 can not be set aside for mistake even if the ultimate results of such injury are far more serious than could have been anticipated by either party. The adversary party can not avoid the contract if the injuries prove to be less serious than they were thought to be.16
This principle, however, is not always adhered to in those cases which depart from the general rule and allow rescission for a mistake of fact in the inducement.17 Thus where a county sold a claim for swamp lands, of doubtful validity, it was allowed to avoid such sale where an allowance of a large tract had been made on such claim shortly before the sale, unknown to the county.18
13 Winston v. Pittsfield, 221 Mass. 356, 108 N. E. 1038.
14 General Accident, Fire & Life Assurance Corporation v. Harris, 117 Miss. 834, L. R. A. 1918E, 929, 78 So. 778; Cogswell v. Boston & M. R. R. (N. H.), 101 Atl. 145; Houston, etc., Ry. v. McCarty, 94 Tex. 298, 86 Am. St. Rep. 854, 53 L. R. A. 507, 60 S. W. 429 [reversing 21 Tex. Civ. App. 568, 64 S. W. 421; citing Alabama, etc., R. R. v. Turnbull, 71 Miss. 1029, 16 So. 346; Homuth v. Ry., 129 Mo. 629, 31 S. W. 903; Seeley v. Traction Co., 179 Pa. St. 334, 36 Atl. 229; Gilliam v. Alford, 69 Tex. 267, 6 8. W. 757; Kowalke v. Light Co., 103 Wis. 472, 74 Am. St. Rep. 877, 79 N. W. 762; distinguishing Lumley v. R. R., 76 Fed. 66, 22 C. C. A. 60]; Quebe v. Gulf, C. & S. F. Ry. Co., 98 Tex. 6, 81 S. W. 20; Kowalke v. Light Co., 103 Wis. 472, 74 Am. St. Rep. 877, 79 N. W. 762.
A release of liability on a policy of accident insurance can not be avoided for mistake as to the nature and extent of the injuries, if by the terms of such policy no indemnity is to be paid until final proof of disability is furnished. General Accident, Fire & Life Assurance Corporation v. Harris, 117 Miss. 834, L. R. A. 1918E, 929, 78 So. 778.
If the parties are contracting for a release of damages for certain injuries which are known, such release will not include other injuries, the existence of which was not then known or suspected. Texas & Pacific Ry. v. Dashiell, 198 U. S. 521, 49 L. ed. 1150; Redding-ton v. Blue, 168 la. 34, 149 N. W. 933; Mclsaac v. McMurray (N. H.), L. R. A. 1916B, 769, 93 Atl. 115.
15 Kowalke v. Milwaukee Electric Ry. & Lt. Co., 103 Wis. 472, 74 Am. St. Rep. 877, 79 N. W. 762.
16 Kelly v. Burnham, 248 Pa. St. 223, 93 Atl. 949.
17 See Sec. 384.
18 Montgomery County v. Emigrant Co., 47 la. 91. The county agreed to sell "all the rest and residue of the swamp land claim and the swamp land
If a mistake as to the contents of a contract is discovered after the contract is signed but before it is executed and delivered, the execution with full knowledge of its contents is at least an acceptance of the offer thus made; and such contract is valid.19 If A signs a contract to convey land, relying upon her husband's statement that such contract conveys only the right to cut growing timber, but A discovers the true nature of such contract before she acknowledges her execution or delivers such contract, such acknowledgment is said to relate back to the time of signing such contract; and she is bound thereby as if she had known its true nature when she executed it.20