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.
A contract entered into under mistake as to an essential element is, properly speaking, void. At the same time courts sometimes speak of ratifying it. Strictly speaking, this is a contradiction in terms, as a void contract is not subject to ratification. What is meant by ratification is that the original transaction may be treated as at least an offer to the party affected by the mistake, which may be accepted by him if not withdrawn by the adversary party, and his acquiescence therein with full knowledge of the facts is such acceptance.1 It has been held that if the contract is a nullity because of mistake as to the identity of the adversary party, acquiescence in a contract fully executed for an unreasonable time, with full knowledge of the facts will prevent the party, who is induced to enter into such contract by such mistake, from obtaining relief.2 Thus making use, after notice of mistake, of goods furnished under such mistake makes the party so using them liable therefor.3 This principle seems to treat such a contract as voidable rather than absolutely void; and as governed by the principles which apply to fraud as a matter of inducement rather than by the principles which apply to fraud or mistake as to an essential element of the contract. Where grantee accepted a deed under mistake as to the identity of the realty conveyed, and after learning of such mistake, he retains such realty until the price of the realty goes down, he can not then avoid the conveyance.4 Where a mistake in the inducement is not ground for avoiding a contract, ratification is, of course, not necessary.5 Mistake in the expression is said to be cured by subsequent ratification.6 Strictly speaking, this means that the parties may by acquiescence substitute the contract, as written, for their original contract. Thus where a note has been renewed several times, a deed intended as a mortgage can not be avoided because given to the president of the bank instead of to the bank.7 An employe who continues to work under a contract after he discovers that its terms have been misstated to him, can not have rescission.8 One who is induced to sign a release by fraud ratifies such release by accepting the money paid thereunder with full knowledge of the facts.9 So accepting an insurance policy waives mistake as to its date.10 Where mistake exists of a type to justify rescission, the party seeking rescission may have it if he seeks it promptly on discovering the mistake;11 while if he delays unreasonably,12 and the adversary party changes his position so that he can not be placed in statu quo,13 rescission will be denied.14 An alteration in position not affecting substantial rights does not of itself prevent rescission. Thus where a vendee of state school lands paid no interest to the state, but the state did not attempt to forfeit such lands therefor, rescission of a conveyance of such lands was allowed.15 Delay in prompt action may be excused by the fact that the character and magnitude of the mistake is discovered only as performance progresses.16 If the party against whom rescission is sought knew of the adversary party's mistake and took advantage of it, rescission may be had against him even where he can not be placed in statu
1 Phelps v. Pratt, 225 111. 85, 0 L. R. A. (N.S.) 945, 80 N. E. 69; Anderson v. Anderson, 251 111. 415, 96 N. E 265; Taylor Iron & Steel Co. v. Nichols (N. J. Eq.), 65 Atl. 695; Simmons v. Palmer, 93 Va. 389, 25 S. E. 6.
2 Mareh v. Whitmore, 88 U. S. (21 Wall.) 178, 22 L. ed. 482; Barnes v. Shoemaker, 112 Ind. 512, 14 N. E. 367; Randolph Iron Co. v. Elliott, 34 N. J. L. 184.
3 Barnes v. Shoemaker, 112 Ind. 512, 14 N. E. 367; Randolph Iron Co. v. Elliott, 34 N. J. L. 184.
4 Simmons v. Palmer, 93 Va. 389, 25 S. E. 6.
5 See Sec. 384.
6 New York, etc., Ins. Co. v. Mo-Master, 87 Fed. 63, 30 C. C. A. 532; Dotterer v. Freeman, 88 Ga. 479, 14 S. E. 863. See also, Hobe Lumber Co. v. McGrath, 102 Minn. 66, 112 N. W. 1053.
7 Dotterer v. Freeman, 88 Ga. 479, 14 S. E. 863.
8 Taylor Iron & Steel Co. v. Nichols (N. J. Eq.), 65 Atl. 695.
9 Maki v. St. Luke's Hospital Association, 122 Minn. 444, 142 N. W. 705.
10 New York, etc., Ins. Co., v. Mc-Master, 87 Fed. 63, 30 C. C. A. 532.
11 Sweeney v. Water Supply Co., 121 Ala. 454, 25 So. 575; Werner v. Rawson, 89 Ga. 619, 15 S. E. 813.
12 Murphy v. Bank, 95 la. 325, 63 N. W. 702.
13 Connecticut, etc., Ins. Co. v. Stewart, 95 Ind. 568; Truesdale v. Sidle, 65 Minn. 315, 67 N. W. 1004.
14 "Where a party desires to rescind upon the ground of mistake or fraud, he must, upon the discovery of the facts, at once announce is purpose and adhere to it. If he be silent and continue to treat the property as his own, he will be held to have waived the objection, and will be conclusively bound by the contract, as if the mistake or fraud had not occurred. He is not permitted to play fast and loose. Delay and vacillation are fatal to the right which had before subsisted": Grymes v. Sanders, 93 U. S. 55, 62, 23 L. ed. 798.
15 Culbertson v. Blanchard, 79 Tex. 486, 15 S. W. 700.
16 "The bill is brought after full performance to the satisfaction of the city, and upon their own showing the plaintiffs seemingly must have discovered during the progress of the work the alleged discrepancies between the requirements as understood by them and the construction of the contract asserted by the city, hereafter referred to as the defendant. The contract of course could not be concurrently quo.17 Thus, A was executor of X's will, and in payment of a legacy given by X to Y, A sent a check to Y's address. Unknown to A, Y had died before X, and the legacy had lapsed. B, Y's administrator, indorsed the check and paid the proceeds to Y's next of kin. A was allowed to recover from B.18 But no valid waiver or ratification can be made unless it is shown that the party alleged to have ratified was then aware of the mistake.19 If the party who seeks to avoid the transaction has parted with what he has received under it before he discovers the mistake, his failure to restore it does not amount to ratification.20