Landmark Case
Sherwood v. Walker
66 Mich. 568
Supreme Court of Michigan, 1887
Facts: Rose 2d of Aberlone was a gentle, 1,420 lb. cow that lived in Michigan in 1886. Rose’s owner,
Hiram Walker & Sons, was a cattle breeder who bought her for $850. After a few years, Walker
concluded that Rose could have no calves. As a barren cow, she was worth much less than $850, so
Walker agreed to sell her for beef to T. C. Sherwood. Walker told Sherwood that Rose was “probably
barren, and would not breed.” After some negotiation, Walker agreed to sell Rose for “five and one-half
cents per pound, live weight, fifty pounds shrinkage,” or $80.
But when Sherwood came to collect Rose, the parties realized that (surprise!) she was pregnant. As a
confirmed breeder, Rose was now worth about $1,000. Walker refused to part with the happy mother,
and Sherwood sued for breach of contract. Walker defended, claiming that both parties had made a
mistake and that the contract was voidable. After the lower court ruled the contract was enforceable,
Walker appealed.
Issue: Does a bilateral mistake render a contract voidable?
Excerpts from Justice Morse’s Decision
A party who has given an apparent consent to a contract of sale may refuse to execute it, or he may
avoid it after it has been completed, if the assent was founded, or the contract made, upon the mistake
of a material fact—such as the subject matter of the sale, the price, or some collateral fact materially
inducing the agreement; and this can be done when the mistake is mutual. </CSTX1>
If there is a difference as to the substance of the thing bargained for, then there is no contract; but if it
be only a difference in some quality or accident, the contract remains binding.
The mistake of the parties went to the whole substance of the agreement. The parties would not have
made the contract of sale except upon the understanding and belief that she was incapable of breeding,
and of no use as a cow. A barren cow is substantially a different creature than a breeding one. There is
as much difference between them for all purposes of use as there is between an ox and a cow that is
capable of breeding and giving milk. The mistake affected the character of the animal for all time, and
for its present and ultimate use. She was not in fact the animal, or the kind of animal, the defendants
intended to sell or the plaintiff to buy.
The mistake affected the substance of the whole consideration, and it must be considered that there
was no contract to sell or sale of the cow as she actually was. The thing sold and bought had in fact no
existence. Defendants had a right to rescind, and to refuse to deliver, and the verdict should be in their
favor.
Question: What type of mistake is present in this case?
Question: Would the Defendant have been able to rescind the contract if they made a unilateral
mistake?
Answer: Probably not. To rescind for a unilateral mistake, the Defendant would have to show that they
Question: Why is a court decision from 1887 still relevant today?
Duress
If one party makes an improper threat that causes the victim to enter into a contract, and the victim had
no reasonable alternative, the contract is voidable. In most states today, economic duress can also be
used to void a contract. In analyzing a claim of economic duress, courts look at these factors:
Acts that have no legitimate business purpose
Greatly unequal bargaining power
An unnaturally large gain to one party
Financial distress to one party.
You Be the Judge: In re RLS Legal Solutions, L.L.C.1
Facts: Amy Maida sued her employer, RLS Legal Solutions for various claims relating to her job.
RLS asked that the case be dismissed because Maida had signed an arbitration agreement. Maida had
signed the contract but argued it should not be enforced because she had signed it under economic
duress. At trial, she testified she did not find the agreement acceptable and explained what happened
after she refused to sign it:
After I refused to agree to this arbitration clause, I was told that my payroll checks would not be
direct deposited into my account until I signed the agreement and that I would not be paid until I
signed the agreement. I had received my paychecks by direct deposit for three years . . . I needed
my paycheck to meet my financial responsibilities since I am a single family income household
provider. I had no way to pay my mortgage, vehicle note, car and homeowner’s insurance as well
as any household bills.
RLS did in fact stop the direct deposit payment of Maida’s salary but after she signed the agreement
paid her by a manual check. Maida eventually received every pay check to which she was entitled.
The trial court refused to dismiss the case or order arbitration, and RLS appealed.
You Be the Judge: Did Maida sign the arbitration under economic duress?
Holding: Judgment for Maida affirmed. The court found economic duress. It declared:
The evidence was sufficient to support a determination that RLS withheld Maida’s compensation
for work already performed for the purpose of obtaining her agreement to arbitrate employment
disputes, and that the withholding of her compensation for work already performed defeated
Maida’s free agency. On this record the trial court reasonably could have found the restraint was
imminent and Maida had no means of protection from the threat. These facts differ from those in
In re Halliburton because here the withholding of payment was for work already performed, and
was not “merely [premising] continued employment on acceptance of new or additional
employment terms.” Even if she was not entitled to continued employment, payment was due for
work already performed, and RLS was not legally entitled to condition that payment on her signing
an agreement to arbitrate.
Question: What did RLS do that Maida claimed was economic duress?
Answer: RLS wanted employees to agree to arbitrate all employment-related disputes. Maida
Question: What is RLS’ argument?
1 2005 WL 171381 Texas Court of Appeals, 2005
Question: I can see why it would be duress not to pay her at all but she received everything to
which she was entitled. Why did the court rule for Maida?
Answer: Because it was economic duress to withhold her sole means of support to force her agree
Undue Influence
To prove undue influence, the injured party must demonstrate:
• A relationship between the two parties either of trust or of domination, and
• Improper persuasion by the stronger party.
Multiple Choice Questions
1. Kerry finds a big green ring in the street. She shows it to Leroy, who says, “Wow. That could be
valuable.” Neither Kerry nor Leroy knows what the ring is made of or whether it is valuable. Kerry
sells the ring to Leroy for $100, saying, “Don’t come griping if it turns out to be worth two
dollars.” Leroy takes the ring to a jeweler who tells him it is an unusually perfect emerald, worth at
least $75,000. Kerry sues to rescind.
(a) Kerry will win based on fraud.
(b) Kerry will win based on mutual mistake.
(c) Kerry will win based on unilateral mistake.
(d) Kerry will lose.
Answer: D. Kerry will lose, based on conscious uncertainty. If Leroy knew the ring was valuable,
2. Veronica has a beer and then makes a contract. She continues drinking, and her blood alcohol level
eventually rises to .09, which is just above her state’s threshold for drunk driving. She makes a
second contract while in this condition. Veronica’s first contract is ____, and her second contract
is ____.
(a) valid; valid
(b) valid; voidable
(c) voidable; voidable
(d) voidable; void
3. Jerry is so mentally ill, that he is unable to understand the nature and consequences of his
transactions, but he has not been adjudicated insane. Penny has been adjudicated insane, and has a
court-appointed guardian. Jerry’s contracts are ____, and Penny’s contracts are ____.
(a) valid; valid
(b) valid; voidable
(c) valid; void
(d) voidable; voidable
(e) voidable; void
4. Angela makes a material misstatement of fact to Lance which he relies on it when he signs Angela’s
contract. Fraud exists if Angela made the misstatement ____.
(a) intentionally
(b) recklessly
(c) carelessly
(d) A and B only
(e) E. A, B, and C
5. Scarborough’s Department Store opens for business on a busy shopping day just before Christmas.
A hurried clerk places a sign in the middle of a table piled high with red cashmere sweaters. The
sign reads, “SALE – 100% Cashmere – $0.99 Each”. The sign, of course, was supposed to read
“$99 each.”
This is a ____ mistake, and customers ____ be able to demand that Scarborough’s sell the sweaters
for 99 cents.
(a) unilateral; will
(b) unilateral; will not
(c) mutual; will
(d) mutual; will not
Case Questions
1. Raymond Barrows owned a 17-acre parcel of undeveloped land in Seaford, Delaware. For most of
his life Mr. Barrows had been an astute and successful businessman, but by the time he was 85
years old, he had been diagnosed as “very senile and confused 90 percent of the time.” Glenn
Bowen offered to buy the land. Barrows had no idea of its value, so Bowen had it appraised by a
friend, who said it was worth $50,000. Bowen drew up a contract, which Barrows signed. In the
contract, Barrows agreed to sell the land for $45,000, of which Bowen would pay $100 at the time
of closing; the remaining $44,900 was due whenever Bowen developed the land and sold it. There
was no time limit on Bowen’s right to develop the land nor any interest due on the second payment.
Comment.
Answer: The contract is voidable by Barrows’s family. Barrows suffered from a mental
2. On television and in magazines, Maurine and Mamie Mason saw numerous advertisements for
Chrysler Fifth Avenue automobiles. The ads described the car as “luxurious,” “quality-engineered,”
and “reliable.” When they went to inspect the car, the salesman told them the warranty was “the
best comparable to Cadillacs and Lincolns.” After the Masons bought a Fifth Avenue, they began to
have many problems with it. Even after numerous repairs, the car was unsatisfactory and required
more work. The Masons sued, seeking to rescind the contract based on the ads and the dealer’s
statement. Will they win?
3. The McAllisters had several serious problems with their house, including leaks in the ceiling, a
buckling wall, and dampness throughout. They repaired the buckling wall by installing I-beams to
support it. They never resolved the leaks and the dampness. When they decided to sell the house,
they said nothing to prospective buyers about the problems. They stated that the I-beam had been
added for reinforcement. The Silvas bought the house for $60,000. Soon afterwards, they began to
have problems with leaks, mildew, and dampness. Are the Silvas entitled to any money damages?
Why or why not?
Answer: The Silvas are entitled to damages for fraud (saying the I-beams had been added merely
4. Roy Newburn borrowed money and bought a $49,000 truck from Treadwell Ford. A few months
later the truck developed transmission problems. Newburn learned that the truck had 170,000 more
miles on it than the odometer indicated. The company admitted the mileage error and promised to
install a new transmission free. Treadwell did install the new transmission, but when Newburn
came to pick up the truck, Treadwell demanded that he sign a general release absolving the
dealership of any claims based on the inaccurate mileage. Treadwell refused to turn over the truck
until Newburn finally signed. The truck broke down again, and delays cost Newburn so much
income that he fell behind on his loan payments and lost the truck. He sued Treadwell, which
defended based on the release. Is the release valid?
Answer: No. Newburn signed under economic duress. Treadwell had no right to hold the truck,
5. Morell bought a security guard business from Conley, including the property on which the business
was located. Neither party knew that underground storage tanks were leaking and contaminating
the property. After the sale, Morell discovered the tanks and sought to rescind the contract. Should
he be allowed to do so?
Answer: Yes. There was no fraud or misrepresentation because Conley knew nothing of the tanks.
Discussion Questions
1. Sixteen-year-old Travis Mitchell brought his Pontiac GTO into M&M Precision Body and Paint for
body work and a paint job. M&M did the work and charged $1,900, which Travis paid. When,
Travis later complained about the quality of the work, M&M did some touching up, but Travis was
still dissatisfied. He demanded his $1,900 back, but M&M refused to refund it since all of the work
was “in” the car and Travis could not return it to the shop. The state of Nebraska, where this
occurred, follows the majority rule on this issue. Does Travis get his money? Is this a fair result?
Answer: Yes, Travis gets his money. In most states, a minor is permitted to disaffirm a contract
and get a full refund of his money, even if he is unable to make restitution. Since restitution is
impossible here, Travis wins his money while M&M gets nothing. Mitchell v. Mizerski, 1995 Neb.
2. Contract law gives minors substantial legal protection. But does a modern high school student need
so much protection? Older teens may have been naïve in the 1700s, but today, they are quite
savvy. Should the law change so that only younger children – perhaps those aged 14 and under –
have the ability to undo agreements? Or is the law reasonable the way it currently exists?
3. Ball-Mart, a baseball card store, had a 1968 Nolan Ryan rookie card in almost perfect condition for
sale. Any baseball collector would have known that the card was worth at least $1,000; the
published monthly price guide listed its market value at $1,200. Bryan was a twelve-year-old boy
with a collection of over 40,000 baseball cards. When Bryan went to Ball-Mart, Kathleen, who
knew nothing about cards, was filling in for the owner. The Ryan card was marked “1200,” so
Bryan asked Kathleen if this meant twelve dollars. She said yes and sold it to him for that amount.
When Ball-Mart’s owner realized the mix-up, he sued to rescind the contract. Who wins?
Answer: This 1991 case sparked much public discussion, as it should in class even today. The
case was settled mid-trial so no rule of law ensued. The settlement provided that the card would be
4. Paula was alone, pregnant, and confused. She needed help and support, which she found at
Methodist Mission Home of Texas. In the days following her child’s birth, representatives of
Methodist Mission forcefully told her that she had no moral or legal right to keep her child: She
had to place her baby for adoption. Paula signed the adoption papers, but days later, she decided
she wanted to keep the baby after all. Was there any ground to rescind?
Answer: In the Methodist Mission case, the court held that the plaintiff had been young and
extremely vulnerable during the days following the birth of her child. The mission’s counselor, to
5. Do you have sympathy for intoxicated people who make agreements? Should the law ever let them
back out of deals when they sober up? After all, no one forced them to get drunk. Or should the
law be more lenient? Or is it reasonable as it currently exists?
6. When Steven Simkin and Laura Blank divorced in 2006, they agreed to split their $13.5 million
fortune evenly. Two years later, it became evident that Simkin had a problem: his half was
invested in Bernard Madoff’s giant Ponzi scheme and he lost millions. Simkin asked Blank to
revise their deal and she refused, so he sued for to rescind their 2006 settlement based on mutual
mistake of fact. He argued that the fatal mistake was that neither party knew that his half was
invested in a fraud. Should a court invalidate the settlement for this mistake?
Answer: A NY Court of Appeals rejected Simkin’s argument. The court likened the mistake to a