Mistakes, Changed Circumstances and Intent
44 Pages Posted: 25 Jan 2007 Last revised: 6 Nov 2015
Date Written: January 22, 2007
A party to a contract may be allowed to escape contractual liability by resorting to one of several "contract defenses." In this Article, I limit my discussion of contract defenses to those where there has been an error in a "basic assumption" material to the transaction. Basic assumption defenses include mutual mistake, unilateral mistake, impossibility, frustration of purpose, and commercial impracticability. Several prevailing rationales explain why a party should be allowed to escape contractual liability despite the sufficiency of consideration where there has been a basic assumption error. No rationale or principle, however, unifies all basic assumption contract defenses. Further complicating matters, similar fact patterns applying a given doctrine often yield inconsistent results. This Article proposes that basic assumption contract defenses can best be explained and analyzed through the prism of contractual intent. Although typically discussed in terms of a singular concept, contractual intent in fact comprises various facets, which I refer to as volitional intent, cognitive intent, and contextual purposive intent. Volitional intent considers whether the party wanted to enter into the transaction. Cognitive intent captures whether the party understood what she or he was doing. Cognitive purposive intent reveals the party's reason or motive for entering into the transaction. This Article concludes that a dynamic approach applying this expanded intent analysis has several advantages over the existing basic assumption doctrines. First and foremost, it directly addresses contract law's two primary objectives, which are furthering autonomy and facilitating transactions. Second, because it removes artificial doctrinal distinctions, it simplifies analysis by focusing on what really matters in contract law ¿ the intent of the parties. Furthermore, it provides for greater consistency in judicial decisions. Finally, the approach is flexible and better accommodates technological advancements in the marketplace, such as Internet transactions where the buyer does not have the opportunity to meet the seller or physically examine a product prior to purchase.
Keywords: mistakes, unilateral mistake, mutual mistake, contracts, changed circumstances, contract defenses, impossibility, commercial impracticability, contractual intent, dynamic
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