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Mistake, Impracticability, and Frustration of Purpose

  Having identified common themes, it is important to stress the difference between mistake, on the one hand, and impracticability and frustration on the other. As noted earlier, the doctrine of mistake applies when the contract is based on an erroneous belief at the time of contracting that certain facts are true. The error causes one or both parties to manifest assent that would not have been given had the true facts been known. When the error is later discovered the mistaken party—or one of them, if the parties shared the mistake—may have grounds to avoid (or in a special case, to claim adjustment of) the contract. The basis of mistake is that the manifestation of assent is not genuine because it was induced by error. Although one party’s error may sometimes be induced by the deception of the other, improper conduct is not an element of mistake and does not have to be shown. (Of course, if there was deception, this fact strengthens the grounds for avoidance and may give rise to an alternative claim of fraud or unconscionability.) In contrast to mistake, impracticability and frustration are concerned with the impact of supervening events on the transaction. These doctrines are not based on any defect in assent at the time of contracting, but aim to provide relief when the basis of a fully consensual transaction is profoundly altered by some external event that occurs afterwards.1

  UCC Article 2 does not deal with the doctrine of mistake, so a mistake in a contract for the sale of goods is governed by principles of common law. As you will see in section 15.7.3, Article 2 does have a provision that deals with impracticability, written broadly enough to encompass frustration of purpose as well.


§15.2.1 The Legal Meaning of Mistake: An Error of Fact

In lay terms, mistake has quite a wide range of meaning. It could refer to a factual error, but it might also include a bad judgment, a rash decision, or simply a situation that did not work out well. For example, it may have been a real mistake to buy that ugly chair, to invest in your cousin’s harebrained enterprise or to drive to town instead of taking the bus. The legal meaning of “mistake” is much narrower. It is confined to errors of fact—that is, to errors about some thing or event that actually occurred or existed and can be ascertained by objective evidence. This leads to a number of important observations on the scope of mistake doctrine:

1 Chronology is a helpful means of deciding whether a case raises an issue of impracticality or frustration rather than mistake. Impracticability and frustration should always be concerned with supervening events. This distinction is not always neatly reflected in the caselaw. Some cases have found impracticality or frustration where, unknown to the parties, the event had already occurred at the time of contracting. It seems more appropriate to treat such a case under the rules of mistake.

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