See Cal. Civ. Code § 1689 (“When party to a contract may rescind.”).
Rescission based on mutual mistake of fact. See Cal. Civ. Code § 1640 (“When, through fraud, mistake, or accident, a written contract fails to express the real intention of the parties, such intention is to be regarded, and the erroneous parts of the writing disregarded.”).
A factual mistake by one party to a contract, or unilateral mistake, affords a ground for rescission in some circumstances.
When the party opposing rescission “knew of or caused the mistake.” Stewart v. Preston Pipeline Inc., 134 Cal. App. 4th 1565, 1587-88 (2005) (“traditional rule” in Restatement of Contracts).
Where the plaintiff has no reason to know of and does not cause the defendant’s unilateral mistake of fact, the defendant must establish the following facts to obtain rescission of the contract:
(1) the defendant made a mistake regarding a basic assumption upon which the defendant made the contract;
(2) the mistake has a material effect upon the agreed exchange of performances that is adverse to the defendant;
(3) the defendant does not bear the risk of the mistake; and
(4) the effect of the mistake is such that enforcement of the contract would be unconscionable.
Restatement Second of Contracts § 153(a) (adopted by court in Donovan v. Rrl Corp., 26 Cal. 4th 261, 281 (2001) (“Because the rule . . . authorizing rescission for unilateral mistake of fact where enforcement would be unconscionable, is consistent with our previous decisions, we adopt the rule as California law”)).
“A mistake of law vitiates consent only if (1) all contracting parties shared the same misunderstanding of the law or (2) one party misunderstood the law, and the other contracting parties were aware of this and failed to rectify it.” Dowling v. Farmers Ins. Exchange, 208 Cal. App. 4th 685, 699 (2012); see Cal. Civ. Code § 1578).
CALIFORNIA STATE COURTS
Supreme Court of California: Donovan v. RRL Corp., 26 Cal. 4th 261, 281 (2001).
California 1st District: Grenall v. United of Omaha Life Ins. Co., 165 Cal. App. 4th 188, 193 (2008).
California 2d District: Chapman v. Skype Inc., 220 Cal. App. 4th 217, 234 (2013) (requirements for rescission based on fraud); Dowling v. Farmers Ins. Exchange, 208 Cal. App. 4th 685, 699 (2012) (limits on rescission for mistake of law); California Federal Bank v. Matreyek, 8 Cal. App. 4th 125, 131-32 (1992) (unilateral mistake of fact).
California 3d District: None.
California 4th District: Hernandez v. Badger Construction Equipment Co., 28 Cal. App. 4th 1791, 1814 n.18 (1994).
California 5th District: White v. Berrenda Mesa Water Dist., 7 Cal. App. 3d 894, 900-01 (__).
California 6th District: Stewart v. Preston Pipeline Inc., 134 Cal. App. 4th 1565, 1587-88 (2005).
CALIFORNIA FEDERAL COURTS
United States Court of Appeal for the 9th Circuit: White v. Autozone, Inc., 213 Fed. Appx. 628, 630 (9th Cir. 2006).
Central District: Hartford Underwriters Ins. Co. v. Newco Int’l, Inc., No. CV 11-6091 RSWL (MRWx), 2012 U.S. Dist. LEXIS 162203, at *5-6 (C.D. Cal. Nov. 9, 2012); YTY Indusries SDN. BHD. v. Dow Chemical Co., No. CV 05-8881 SGL (AJWX), 2009 U.S. Dist. LEXIS 101203, at *61 (C.D. Cal. Oct. 28, 2009) (rescission based on unilateral mistake rendering enforcement unconscionable).
Eastern District: YTY Indus. SDN BHD v. Dow Chem. Co., No. CV 05-8881 SGL (AJWX), 2009 U.S. Dist. LEXIS 101203, at *59-61 (E.D. Cal. Oct. 28, 2009)..
Northern District: Perth v. Davis, No. CV 08-03115 CRB, 2009 U.S. Dist. LEXIS 116067, at *5-6 (N.D. Cal. Dec. 14, 2009).
Southern District: Genesis Merch. Partners, LP. v. Nery’s USA, Inc., No. 3:11-cv-1589-JM (WVG), 2013 U.S. Dist. LEXIS 105148, at *25-26 (S.D. Cal. July 26, 2013); Scott v. Napolitano, No. 08cv0735 BTM(JMA), 2012 U.S. Dist. LEXIS 139616, at *8 (S.D. Cal. Sept. 27, 2012).