Bailey v. Ewing

Brief Fact Summary.

Bailey (plaintiff) sued Ewing (defendant) to quiet title for certain real property.

Synopsis of Rule of Law.

Under contract law, parties seeking to assert a defense of mutual mistake requires that both parties must be mistaken on a basic assumption of a material fact.

Facts.

Ewing was shown a piece of real property that was to be divided into two lots after the previous owner died. While showing Ewing the property, the auctioneer indicated the property line was 13 feet away from the hose that had lilac bushes. After the plaintiff moved in next door, Ewing began to maintain the property up to the bushes and proceeded to build a fence where the bushes began. After Bailey sued to quiet title, Ewing counterclaimed, seeking reformation of the deed based on the defense of mutual mistake of the parties, thus making the contract voidable.

Issue.

Whether under contract law, parties seeking to assert a defense of mutual mistake requires that both parties must be mistaken on a basic assumption of a material fact.

Held.

Yes. Under contract law, parties seeking to assert a defense of mutual mistake requires that both parties must be mistaken on a basic assumption of a material fact.

Discussion.

When parties have both made mutual mistake concerning an important fact that was assumed to be true before they entered into the contract, the contract can be reformed. Even if a contract is fully integrated, that is, both parties intended the writing to be final and complete, parol evidence will still be admissible to prove the mistake. However, if a third party bona fide purchaser’s rights would be harmed courts will not reform the contract, even where mutual mistake exists. Here, while the auctioneer and Ewing were mistaken about the boundaries of the property, resulting in mutual mistake being applicable, reformation of the contract would hurt the rights of a third-party purchaser, Bailey.