Contracting Party Who Assumed Risk Could not Rescind Marital Settlement Agreement for Mutual Mistake

January 13, 2016 | Blog, Court Decisions, Equitable Distribution, Settlement

Icon for author Brian Vertz Brian Vertz

In Orris v. Orris, No. 340 WDA 2015 (September 30, 2015), a non-precedential decision, the husband and wife entered into a marital settlement agreement after Wife procured an appraisal of the timber rights associated with marital property. In the agreement, Husband surrendered the timber rights to Wife in exchange for the marital residence. Subsequently, after the divorce was finalized, Husband presented a petition to rescind the agreement on the grounds of mutual mistake, claiming that the appraisal was inaccurate. The trial court held that it did not have jurisdiction to open, modify or vacate the divorce decree and settlement agreement (which the trial court deemed to be merged in the decree).

The Superior Court began by holding that the agreement was not merged, but merely incorporated in the divorce decree. As such, it was enforceable as a contract unless there were traditional grounds for rescission or modification of a contract. Mutual mistake is one of the traditional grounds.

Next, the Superior Court examined §§ 152 and 154 of the Restatement (Second) of Contracts, dealing with mutual mistake. A contract may not be rescinded, under § 154, if the party seeking rescission “bears the risk” of a mistake. A party is deemed to have borne the risk if the risk is allocated to him or her under the agreement, if the party makes the contract with limited knowledge of the relevant facts, or if the circumstances dictate that the party should bear the risk.

The Superior Court held that husband bore the risk of mistake by failing to obtain his own appraisal of the timber rights. Having declined to obtain his own appraisal or inquire into the assumptions and methodology of Wife’s appraiser, he could not rescind the contract on the basis of mutual mistake.

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