As I’ve stated numerous times here at Musings, in Virginia the contract is king. The courts of Virginia will read a contract as written and where there is a contract (read as foreshadowing), the courts will assume the parties knew what they were doing and enforce it by its terms. However, there has to be a contract in the first place.
When can something look like a contract but still not be a contract? When there isn’t mutual assent according to the case of Knox Energy, LLC v. Gasco Drilling, Inc. In the Knox case, along with a ruling on discovery abuse that is a topic of other blogs, considered a jury instruction on mutual assent given by the district court in a case where Knox contended that it inadvertently sent an unexecuted drilling contract form to Gasco and then inadvertently executed it when Gasco returned it. While this would not normally cause this series of events to be a non-contract, Knox also contended that Gasco knew that Knox had no intention to enter into the drilling contract and that Gasco jumped at the deal.
After hearing the evidence, the jury was instructed on the basic law of mutual assent and contract as follows:
For a contract to exist, the minds of the parties must have met on every material term of the alleged agreement. Whether the minds have met is a question of intention. For there to be an agreement, the parties must have a distinct intent common to both and without doubt or difference. Because the offer and acceptance may be by word, act or conduct, a meeting of the minds may be shown by direct evidence of intent, or by indirect evidence of facts which imply intent. If a party’s words or actions warrant a reasonable person in believing that it intended a real agreement, its contrary, but unexpressed, state of mind is immaterial.
A party cannot snap up an offer that is too good to be true. If either party knew, or should have known, that the other had made a mistake with respect to the alleged agreement, then there was no meeting of the minds, and no contract.
After the jury held for the plaintiff, Gasco appealed and argued that this instruction misstated Virginia law for various reasons further explained in the text of the opinion. The 4th Circuit disagreed stating that mutual assent has to be present for a valid contract to exist and that the instruction quoted above correctly stated the law. In short, a party cannot seek to take advantage of what it knows is a mistake by the other and still enforce a contract.
Does this mean that every mistake will get you out of a contract? I doubt it. However, all is not lost if a party can show that the other side was snapping up an offer that is “too good to be true” and knew that a mistake was at hand.
As always, I recommend that you read the opinion yourself and draw your own conclusions.
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