A fiduciary relationship is a relationship based upon trust. Such a relationship exists between attorneys and clients, guardians and wards, trustees and beneficiaries, and directors and a corporation. If one party is in a fiduciary relationship with another party, then an obligation arises to reveal what otherwise might be withheld when the two parties enter an agreement.
A false statement made innocently with no intent to deceive is called misrepresentation. Innocent misrepresentation makes an existing agreement voidable, and the complaining party may demand rescission. Rescission means that both parties are returned to their original positions before the contract was entered into. Unlike cases based on fraud, which allow rescission and damages, cases based on innocent misrepresentation allow only rescission and not money damages.
When there has been no real meeting of the minds because of a mistake, mutual assent was never achieved and the agreement may be rescinded. As in misrepresentation, mistake permits rescission.
Some mutual mistakes are universally accepted as grounds for rescission. Others can give rise to lawsuits but not in all courts or in all jurisdictions. Among them are:
1. Mistakes as to Description. When both parties are mistaken in the identification and description of subject matter, a mutual mistake exists, and rescission will be granted.
2. Mistakes as to Existence. Proof that the subject matter had been destroyed before agreement was made also gives grounds for rescission. The agreement would be voidable if it were proved that just before acceptance the subject matter had been destroyed.
3. Mistakes as to Value. When two parties agree on the value of the subject matter and later find that they were both mistaken, a mutual mistake of opinion, not of fact, has occurred. Mutual mistakes of opinion are not grounds for rescinding a contract.
4. Mistakes Through Failure to Read a Document. Failure to read a document or the negligent reading of a document does not excuse performance on the ground of a mistaken understanding of the document's contents.
5. Mistakes of Law. Misunderstandings of existing laws do not give grounds for rescission; in other words, ignorance of the law is no excuse. Rescission may be allowed, however, when mistakes have related to the law of another jurisdiction.
Duress and undue influence rob a person of the ability to make an independent, well-reasoned decision to enter a contractual relationship freely.
