Question

Research the American case of Sherwood v. Walker. This 19th century case involving the sale of a cow is one of the most famous contracts cases in American law. Give an outline of the facts in the case. What were the main legal issues involved? What approach did the court take in ad-dressing the legal issue? How did the court apply its approach to the facts of the case? Provide a detailed example of how the court's conclusion might be applied in a modern business setting. 

Answer 1

THE FACTS OF THE CASE :

Theodore Sherwood was in search of some scows and in a routine he met Hiram Walker and sons who were in the business of cattle breeding. Sherwood expressed his interest in a cow named “Rose 2d of Aberlone” Sherwood was informed that the cow is barren and would not breed. It was not a big issue for Sherwood as he was likely having a plan to use the cow for beef . after some initial negotiation Sherwood agreed to pay five and one half cent per pound of living weight of the cow with fifty pound shrinkage . he sought the confirmation f the deal in black and white from Walkers , which was duly sent by them. Few days later when Sherwood came with amount payable and take the delivery of the cow . Sherwood tendered$ 80 to Hiram Walker and sons and sought the delivery of the cow. But walkers refused to accept the money and to deliver the cow. It was revealed that the cow was pregnant and its worth was $ 1000, this fact was not known to Mr Walker at the time of sale agreement. Since he was now aware of the fact he tried to back out of the deal entered with Sherwood.

Sherwood brought a case against Walkers and sons. Sherwood got the judgment in his favour in the Trial court and the Wayne County Circuit Court where an appeal was preferred by Walkers. But without getting disturbed Walkers went to the Supreme Court of Michigan where court reverted the earlier judgments and overruled the lower courts and held in favour of Walkers. The court observed:

The mistake or the misapprehension of parties went to the whole substance of the agreement. If the cow was a breeder , she was a worth at least $750 if barren she was worth not over $80. The parties would not have made the contract of sale except upon the understanding and belief that she was incapable of breeding and no use of as a cow. She is now the identical animal they thought her to be when the contract was made, there is no mistake as to the identity of the creature. The mistake was not of quality of the animal but went to the nature of the very thing . there is much difference in a barren and a breeding cow……….the court further observed that if the mistake had simply related to the fact whether she was with calf or not for one season, then it might have been a good sale. But here the mistake affected the whole character of the animal and cannot be treated as the similar animal which was intended to be sold. If the fact that cow was not barren , had been known there would have been no contract. The mistake actually affected the substance of the whole consideration and must be considered that there was no contract of sale of the cow as she actually was. The thing sold and bought in fact had no existence. In essence because a mutual mistake affected the very substance of the transaction, Walker had a right to rescind the contract with Sherwood and keep the cow in question”

Impact of the case on modern contracts

This judgment is popularly known as “Doctrine of Mutual Mistake” which has great impact on the law of Contract in US. It has big impact on modern commercial transaction where the subject matter of sale purchase may not be a cow but ruling applies staunchly. Of course if it is unilateral mistake than the situation would be different. Thus it is critically important to avoid mistake with due diligence in a commercial transaction. A court is not going to reward any party for its own negligence –regardless of any mutual mistake

In ACA Galleries, Inc. v. Kinney, 928 F. Supp. 2d 699 (S.D.N.Y. 2013), aff’d, 552 Fed. Appx. 24 (2d Cir. 2014) case , an art gallery sued an individual for selling it a forged Milton Avery painting for $200,000. ACA sought rescission of its contract with the seller, Kinney, arguing that there was a mutual mistake

While District Judge Miriam Goldman Cedarbaum agreed that there was a mutual mistake, she also noted that the doctrine of mutual mistake, “may not be invoked by a party to avoid the consequences of its own negligence.” Here, Kinney gave ACA full access to the painting at a storage facility before the purchase as stated in the facts

ACA had every opportunity to inspect and get authenticated by any expert before settling the deal l with Kinney. However, ACA waited and got the painting examined by the expert the Avery Foundation. By failing to have this important examination before the transaction was consummated, ACA was precluded from invoking the doctrine of mutual mistake.

The Second Circuit Court of Appeals also agreed with the judgment that ACA knew that its “self-conducted pre-purchase inspection provided it with ‘only limited knowledge with respect to the facts which the mistake relates but treated its limited knowledge as sufficient.’”

The appellate court also noted that it was purposely avoided by ACA to get the painting examined by the Avery Foundation with a fear that would have likely resulted in higher price for the artwork. As the appellate court concluded, "ACA could have accepted the higher price that accompanies certainty of authenticity, but chose instead to accept the risk that the painting was a forgery. The contract is not voidable merely because the consciously accepted risk came to pass.”

So the essence is that one should diligently apply to ascertain precisely what one going to get after a commercial transaction. What should be the actual amount what one is paying is also decided by performing diligently. While a court will protect an innocent party that has applied his diligence ,from the consequences of mutual mistake, a court will not protect a negligent party who fails to conduct its own due diligence. The case of ACA Galleries builds upon” the Cow case” (Sherwood v. Walker), and emphasize the important legal principles that are still valid in today’s commercial contracting system .

Note   since the given question is based on Law facts therefore the language may appear similar to some articles on internet which can not be treated as plagiarized as the legal language remain same .