Rescission or Reformation of Sale Based Upon a Mutual Mistake

A party seeking to rescind a contract on the basis of mutual mistake must show by clear and convincing evidence that the agreement should be set aside. Emmons v. Superior Court, 192 Ariz. 509, 968 P.2d 582 (App. 1998). A contract may be rescinded on the ground of a mutual mistake as to a "'basic assumption on which both parties made the contract.'" Renner v. Kehl, 150 Ariz. 94, 97, 722 P.2d 262, 265 (1986), quoting Restatement (Second) of Contracts 152 cmt. b (1979). Furthermore, the parties' mutual mistake must have had "'such a material effect on the agreed exchange of performances as to upset the very bases of the contract.'" Id., quoting Restatement 152 cmt. a. However, the mistake must not be one on which the party seeking relief bears the risk under the rules stated in 154(b) of the Restatement. Emmons; Restatement 152. "'Courts should not assume an overly paternalistic attitude toward the parties to a contract by relieving one or another of them of the consequences of what is at worst a bad bargain . . . and in declaring the contract at issue here unconscionable, we would be doing exactly that.'" Pacific Am. Leasing, 152 Ariz. at 103, 730 P.2d at 280, quoting Dillman and Assocs., Inc. v. Capitol Leasing Co., 110 Ill. App. 3d 335, 442 N.E.2d 311, 317, 66 Ill. Dec. 39 (Ill. App. 1982). See also State ex rel. State Highway & Transp. Dep't v. Garley, 111 N.M. 383, 806 P.2d 32 (N.M. 1991); Park Valley Corp. v. Bagley, 635 P.2d 65 (Utah 1981).