Citation. 22 Ill.92 Idaho 757, 450 P.2d 604 (1969)
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The Plaintiff, Boise Junior College District (Plaintiff), brought suit against the Defendant, Mattefs Construction Co. (Defendant) in an attempt to collect on a bid bond.
Synopsis of Rule of Law.
Rescission is an equitable remedy when both parties enter into a contract under a mutual mistake.
Facts.
Plaintiff sought bids for a project from various construction companies. Defendant had the second-lowest bid and included in its bid was a bid bond, which offered to pay reliance damages to the Plaintiff, if Defendant turned down the job for any reason. Defendant realized a clerical error had been made when formulating the bid and sought rescission, rather than being held to the terms of the contract. The trial court found that a material mistake (i.e. a mistake that affected the essence of the contract) had been made and allowed rescission. Plaintiff appealed.
Issue.
This case considers whether rescission is available when there is a mutual material mistake in the negotiation process.
Held.
Affirmed.
While the Court did affirm that Defendant would be allowed to rescind, it did so by considering the conditions of the contract. The court found that Defendant, in preparing a bid for a public works contract was allowed rescission, if he could prove (1) that his mistake was material; (2) that enforcement of a contract pursuant to the terms of the bad bid would be considered unconscionable; (3) that the mistake was made in good faith; (4) that the Plaintiff would not be prejudiced by the loss of the deal and (5) prompt notice of the error was given.
In this case, each of these elements can be outlined as follows: (1) Defendant’s mistake was material, in that it went to the essence of the contract (evidenced by the fact that the discrepancy was almost a 14% error); (2) because Defendant would suffer an economic loss, enforcing the bid was unconscionable insofar as it created a burden; (3) clerical errors are always considered good faith mistakes, unless proven otherwise; (4) the Plaintiff couldn’t prove any hardship, in that it had assumed it would be paying $150,000 and the bid it ended up using was $149,000 and (5) Defendant gave notice of his error as soon as he realized a mistake was made.
Discussion.
This is considered a mutual mistake case because the clerical error led both sides to believe they were entering into a contract that was different than it really was.
