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Rooftop Law School: The Case of the Unforced Error

On August 23rd, Luis Bacalao, Assistant General Counsel at Khosla Ventures, presented his fourth baseball themed Rooftop Law School session by recounting the case of a Nolan Ryan rookie card that was "mistakenly" sold to a 12-year old boy for $12.00 instead of $1,200. The store owner subsequently sued the boy for $1,188 to make up the difference. The discussion led with this question: Is a contract voidable in the case of a unilateral mistake?

And how should the law regard contracts (in this case a sales transaction) formed between two people who possess different information relating to the subject matter of the deal?




The Scenario

Twelve-year-old card collector Bryan Wrzesinski, owner of some 40,000 baseball cards, spotted a 1968 Nolan Ryan/Jerry Koosman rookie card at the Ball-Mart, a newly opened baseball card store in Itasca, Illinois. The price of the card was marked as "1200/." An inexperienced sales clerk interpreted this figure to mean $12.00 and accepted that amount in exchange for the card. The proprietor of the Ball-Mart, Joe Irmen, claimed that the card had been offered for sale at $1,200 (a price in line with its market value) and asked for it back. Wrzesinski refused to reverse the transaction. - Andrew Kull (Washington Law Review, 1992) 

Restatement (Second) of Contracts

§ 153. When Mistake of One Party Makes a Contract Voidable
Where a mistake of one party at the time a contract was made as to a basic assumption on which he made the contract has a material effect on the agreed exchange of performances that is adverse to him, the contract is voidable by him if he does not bear the risk of the mistake under the rule stated in § 154, and

(a) the effect of the mistake is such that enforcement of the contract would
be unconscionable, or
(b) the other party had reason to know of the mistake or his fault caused the
mistake.

§ 154. When a Party Bears the Risk of a Mistake
A party bears the risk of a mistake when:

(a) the risk is allocated to him by agreement of the parties; or
(b) he is aware, at the time the contract is made, that he has only limited
knowledge with respect to the facts to which the mistake relates but treats his limited knowledge as sufficient; or
(c) the risk is allocated to him by the court on the ground that it is
reasonable in the circumstances to do so.


What We Learned

Luis presented us with four scenarios and asked us to apply §153 and 154 accordingly:

  • Scenario 1: The shop owner knows the card is worth $1200, but the sales clerk
    mistakenly sells the card for $12. The boy knows its sales price is actually
    $1200.
  • Scenario 2: The shop owner has no idea what the card is worth and lists it at $12, but
    the boy knows its actually worth $1200.
  • Scenario 3: The shop owner knows the card is worth $1200, but the sales clerk
    mistakenly sells the card for $12. The boy doesn’t know the card’s true
    value.
  • Scenario 4: No one knows what the card is worth.

We had a lively discussion and ultimately learned that after two days of trial, and moments before the judge was to issue her decision, both parties announced a settlement: the card would be sold at auction and the proceeds given to charity. A collector ultimately paid $5,000 for the Nolan Ryan baseball card — to this day, we're left hanging as we'll never know how the judge would have decided the case.

If you're interested in learning more, check out these resources:


What is Rooftop Law School?

It’s an Ironclad tradition dating back to (that one time when) we gathered a group of our friends together on the roof of our building to nerd out over the legal issues of the day. Since then, it’s evolved into an informal gathering of lawyers and non-lawyers alike discussing a legal case over beers, wines, and snacks. In the past, we’ve discussed everything from monkeys taking selfies to software patents to haunted houses. We always end up meeting new people and learning fascinating things. If you'd like to present, please email us at community@ironcladcm.com.

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