Question

In 2006, Jack Kelly, LLC, entered into a commercial lease agreement for a second-floor space of a building located in Manhattan. The lease stated that "Tenant shall use and occupy the demised premises for general offices of an executive recruiting firm... [and] for no other purpose." Additionally, the lease also stated that tenants could not use the rented space in any manner that violated the certificate of occupancy for the building or violated any laws or regulations. In 2007, Jack Kelly discovered that the certificate of occupancy for the building required that the rented premises be used only for residential purposes. Jack Kelly subsequently asked the leasing company to amend the certificate of occupancy, but the leasing company did not comply. Following the leasing company’s failure to amend the certificate of occupancy, Jack Kelly vacated the space in 2009 and filed a claim of action for rescission, seeking declaratory judgment that the lease was invalid and unenforceable, among other things. Although the trial court granted summary judgment to the defendants, in the ensuing appeal, the appellate court reversed the decision. What elements must be present to prove mutual mistake? How does Jack Kelly’s case fulfill all the elements?

Answer 1

To prove mutual mistake, certain elements must be present, including a material mistake of fact made by both parties. Jack Kelly's case fulfills these elements because of the mistaken belief about the intended use of the rented premises.

Step-by-step explanation:

To prove mutual mistake, the following elements must be present: (1) There must be a material mistake of fact made by both parties; (2) The mistake must relate to a basic assumption of the contract; (3) The mistake must have a material effect on the agreed-upon exchange; and (4) The party seeking rescission must not bear the risk of the mistake.

In Jack Kelly's case, it fulfills these elements because both parties mistakenly believed that the rented premises could be used for an executive recruiting firm, when in fact the certificate of occupancy stated that it could only be used for residential purposes. This mistake was material to the agreement and had a material effect on the intended use of the space.