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Owner entered into a written contract with Builder for the construction of a custom home. The contract price was $500,000.
Six months into construction, Builder encountered unexpected rock formations requiring expensive blasting. Builder notified Owner that removal would cost an additional $50,000.
Owner refused to pay additional costs, claiming the contract required Builder to complete work for the agreed price regardless of unforeseen conditions.
Mutual Mistake Analysis
Issue: Whether Builder has grounds to recover the additional $50,000.
Rule: Under Restatement (Second) of Contracts §152, a mutual mistake as to a basic assumption renders the contract voidable.
Application: Here, the rock formations were unknown to both parties. However, the risk allocation
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Contracts
Owner entered into a written contract with Builder for the construction of a custom home. The contract price was $500,000.
Six months into construction, Builder encountered unexpected rock formations requiring expensive blasting. Builder notified Owner that removal would cost an additional $50,000.
Owner refused to pay additional costs, claiming the contract required Builder to complete work for the agreed price regardless of unforeseen conditions.
Mutual Mistake Analysis
Issue: Whether Builder has grounds to recover the additional $50,000.
Rule: Under Restatement (Second) of Contracts §152, a mutual mistake as to a basic assumption renders the contract voidable.
Application: Here, the rock formations were unknown to both parties. However, the risk allocation
