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Parsi Investment, LLC v. Township of Galloway

A-1603-09T2 (N.J. Super. App. Div. 2010) (Unpublished)

CONTRACTS; MUTUAL MISTAKE — The doctrine of mutual mistake applies when both parties are operating under the same misapprehension as to a particular, essential fact, but even if there is a mutual mistake, if the contract specifically allocates a particular risk to one party or the other, that party must bear the risk.

A municipality sold a vacant lot at auction. The buyer, after its purchase, learned that the percentage of unusable wetlands and buffer included in the parcel was more than that recited in the municipality’s appraisal or in the wetlands map that had been included in that appraisal. Claiming reliance, the buyer sued the municipality seeking rescission or reformation of the contract or for an award of damages based on claims of equitable fraud and unjust enrichment. The lower court granted summary judgment in favor of the municipality.

The appraiser accounted for the fact that approximately fifty-five percent of the property was unusable due to wetlands and applicable buffer restrictions. He also stated that the property’s value would have varied if the wetlands map provided to him had shown a larger or smaller area impacted by wetlands. The map included in the report warned that it was for demonstration purposes only and had not been not developed in accordance with national standards. Additionally, the contract of sale disclaimed any promise as to any property value implied from the appraisal.

On appeal, the buyer claimed that mutual mistake precluded summary judgment. Mutual mistake applies when both parties were operating under the same misapprehension as to a particular, essential fact. Here, however, even if there was a mutual mistake, the municipality was entitled to judgment because the contract specifically allocated any risk as to the value of the property to the buyer. Additionally, both parties were put on notice of potential inaccuracies by the warning on the map. For those reasons, the Appellate Division upheld the lower court’s decision.

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