Lenawee County Board of Health v. Messerly
Citation and Court
Lenawee County Board of Health v. Messerly, 417 Mich. 17 (Mich. 1982)
Facts
The Pickles purchased a small rental property from the Messerlys. Shortly after closing, the county health department condemned the property because it had a defective and illegal sewage system that had been installed by a prior owner without knowledge of either buyer or seller. The Pickles sought rescission for mutual mistake. The purchase agreement contained an “as is” clause.
Issue
Whether the buyers could obtain rescission of a real estate purchase contract based on mutual mistake about the condition of the property’s sewage system, given that the contract contained an “as is” clause.
Holding
The Michigan Supreme Court denied rescission, holding that the “as is” clause allocated the risk of unknown defects to the buyers, and therefore the buyers bore the risk of the mistake and could not obtain rescission.
Rule / Doctrine
Even where parties share a mutual mistake about a basic assumption of their contract, rescission will be denied if the party seeking relief bore the risk of the mistake—either by agreement (such as an “as is” clause), by conscious awareness of uncertainty, or because it would be otherwise reasonable to allocate the risk to that party. Risk allocation under the contract controls the mutual mistake analysis.
Significance
A leading case on risk allocation and mutual mistake. Demonstrates how courts analyze the Restatement (Second) § 154 factors for risk allocation and shows that an “as is” clause can defeat a mutual mistake claim even when the mistake was genuine and material. Paired with Jackson v. Seymour and Raffles v. Wichelhaus in the mistake doctrine.